Reserve

Reserve -  1. the appropriation of retained earnings/profit for a designated purpose, such as plant expansion or a bond sinking fund. The purpose of the reserve is to tell stockholders and creditors that part of retained earnings is unavailable for dividends. Or 2. the accrued liability, such as reserve for taxes (outdated usage). Or 3. contra account to the gross cost of an asset to arrive at the net amount, such as reserve for depreciation or reserve for bad debts. In this use, the term reserve is outdated; accumulated depreciation and allowance for bad debts are used instead.

Provision

Provision – The allowance made in accounts for depreciation. Or 2) Is to prepare in advance for an event that is projected to place in the future. In accounting, it is an amount charged against profits for a specific liability (for example: bad debts, depreciation or taxes). A liability may be known, but the amount is often uncertain. This uncertainty may lead to an adjustment in a later income statement once the final amount of the liability is ascertained.