The following are the main differences between reserve and provision: (i) Mode of Creation: Reserve is created against the charge of the profit and loss appropriation account. Provision is created against the change of the profit and loss account. (ii) Objective: Main objective of reserve is to strengthen the financial position and to meet future unknown losses and liabilities. Objective of provision is to meet known losses and liabilities the amount of which is not certain. (iii) Relation with Profit: Reserve is created when there is enough profit in the business. Provision is created even if there is loss in the business. (v) Distribution: Reserve can be distributed to shareholders as dividend. Provision cannot be distributed as dividend to shareholders.(vi) Future Requirement: Provision is created by estimating the future requirements of the business. (vii) Impact: Impact of reserve will be on financial position. Impact of provision will be on profit or loss of the business.