Accounting · Provisions and Reserves
Which of the following is an INCORRECT difference between provisions and reserves?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Provision is created for a known liability, whereas reserve is created for an unknown liability.
- 2Creation of provision is usually necessary, whereas reserves' creation depends upon management policy.
- 3Provision is an appropriation of profits, whereas reserve is a charge against profits.✓
- 4Provisions are not available for distribution as dividend among shareholders.
Correct answer
Provision is an appropriation of profits, whereas reserve is a charge against profits.
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