Provisions and Reserves Flashcards
1
Q
What are provisions?
A
This is an amount of profit retained in the business to meet an expected loss. They do not contain sums of money. The most common provisions you will see are Provisions of Depreciation and Provisions for bad/doubtful debts.
2
Q
What are reserves?
A
These are not charges against profits (expenses) but an appropriation of profits. Reserves can either be Capital Reserves or Revenue Reserves. Both are shown in the Reserve section of the bottom half of the Statement of Financial Position.
3
Q
What does Capital Reserve include?
A
Share Premium Reserve and Revaluation Reserve. Revenue Reserve include the Unappropriated profit of the business.
