Depreciation, Provision and Reserves

Depreciation, Provision, and Reserves are critical components in financial accounting that help businesses manage their assets, liabilities, and overall financial health. Depreciation refers to the systematic allocation of the cost of tangible assets over their useful lives, reflecting asset wear and tear. Provisions are amounts set aside to cover expected future liabilities, ensuring that expenditures are anticipated and managed effectively. Reserves, on the other hand, represent profits that are retained within the business for specific future purposes. Together, these concepts play a vital role in ensuring accurate financial reporting and compliance with regulatory standards.