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Provisions and Reserves — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountProvisions and Reserves1 Mark
MCQ
Which of the following is a correct difference between a provision and reserve?
  • ✓
    A provision is created out of a legal necessity whereas a reserve is created as a matter of prudence.
  • B
    A provision is invested whereas reserve is not invested.
  • C
    A provision is an appropriation of profit whereas a reserve is a charge against profit.
  • D
    A provision can be used for distribution of dividend whereas a reserve cannot be allowed to be used for distribution of dividend.
✓

Answer

Correct option: A.
A provision is created out of a legal necessity whereas a reserve is created as a matter of prudence.
A provision is created out of a legal necessity whereas a reserve is created as a matter of prudence.

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