Comments on: Difference Between Provision And Reserve

By: kiran

kiran — Wed, 05 Nov 2008 18:51:26 +0000

since provision is charge to p&l, we create provision for bad debts bydebiting bad debts and crediting the provision for bad debts.if we say “reserve for bad debts”,do we need to debit retained earnings and credit ‘reserve for bad debts’, as reserve should be appropriation of profits…..

By: atul singh

atul singh — Wed, 24 Sep 2008 16:29:57 +0000

it,s cool to get things in such a nice manner
thanks

By: Ronald

Ronald — Tue, 09 Sep 2008 08:34:54 +0000

Can different reserves be consolidated as one without reference to the Board who initially approprited the profits?

By: tonero

tonero — Mon, 01 Sep 2008 22:45:03 +0000

I have just concluded working on the balance sheet of a company and it turns out that on the liability and equity side of the balance, there is a negative reserve. I believe its a capital reserve. My question is, can it be possible to have a negative reserve? if yes, what is the implication of that to the company? if no, could it be that the negative “reserve”shown in the balance sheet is actually under a wrong heading? Please advice. Thanks

By: slang

slang — Fri, 11 Jul 2008 11:41:51 +0000

Examples of accruals are accruals for utilities,audit fees and other type of expenses which can be estimated quite accurately.(take the past few months bills trend) The purpose of Accruals and provisions is the same re: matching costs against the revenue being generated. However,Provision are a bit more of estimate in nature compared to accruals for example say 2% of provision for doubtful debtors or 3% for provision for stock obsolesence. Reserves are of different class as it it appropriated/taken off from profit to provide for certain event/contingency.

By: Sivakumar

Sivakumar — Fri, 11 Jul 2008 10:59:39 +0000

Hi,

I am working for a MNC (US Based). I would like to know the terminology used “accrual”. What does accrual mean? “provision” or “reserve”. I handle a task of valueing the inventory. I use a prorata % to calculate the obsolescence of inventory and accordingly a reserve (provision ???) is being created in the books of accounts.

I learn that in common parlance, provision should be for a certain amount of money. Reserve is appropriation against profits.

Can you please throw more light on the above.

Thanks,
Sivakumar

By: slang

slang — Sun, 20 Apr 2008 15:17:44 +0000

actually,prepayments are “suspended” in the balance sheet until it can be expensed off/matched to the next accounting period. As the company had already paid the amount, it is “parked” as an asset in the balance sheet.

By: mutaz

mutaz — Sat, 19 Apr 2008 21:05:28 +0000

thanks for the valuable informations , but why we take the prepaid expenses as an asset account?

By: slang

slang — Fri, 11 Apr 2008 00:32:57 +0000

Reserves actually are not taken up into so-called the liability side. When we look a conventional balance sheet format, we have the asset,liabilities and share equity/shareholder funds.
In the case of reserves, which can be capital or revenue reserves(refer to my earlier article) it is at the shareholders fund side.
rgds

By: Srinivas

Srinivas — Thu, 10 Apr 2008 10:35:44 +0000

Reserves are recorded in liablity side of the balance sheet even after the company earns profit after all the expenses and losses are covered. But we call profit is an asset, amount profit is kept as an reserve but still we call as an liabity. Why?

Why cant we record reserve in asset side. Why should we record in liabilty side.

Please answer the question.