What is the difference between Provision and Reserve?

If you are in business, you may have heard the terms “provision” and “reserve” being thrown around. They are two terms that have to do with holding money. However, the provision is used whenever the business has suffered a loss, or they are being held liable for something. This money that is in the provision can be used because the loss was expected and the money will be used to pay for this loss.

A reserve, on the other hand, is money that is held because it will be used in the future. However, the reserve is not expecting something terrible. It could be used for something good. People get these words confused with these two terms when talking about saving money for the future.