The difference between custom and reserve

Money

Money is the backbone of the institutions, and a major reason for their survival and continuity,

the institutions need funds to create projects and buy various assets and pay the wages of

employees and follow up other obligations arising from the institution, so that the financial

management of the institution aims to control the costs without affecting the quality of the

outputs produced by that institution, and control the costs either by rationalizing the points or

optimizing the resources, and also leads to the achievement of the goals of financial

management and increase the profits and wealth of the owners in the institution.

Many of the foundation's sources of financing include short-term credit, such as commercial

and bank credit, and long-term, such as equities, bonds and loans, or through withholding

profits, funds held by the enterprise or company within it in order to expand and increase the

size of its business.

Through the title of the article that presents the difference between the allocation and the

reserve we must distinguish between the definition of each of them, first I want to define the

allocation which is an amount that takes from the revenue to face the loss such as

depreciation, or in other words is an allowance taken from the company's revenues and does

not distribute profits as is customary, but these allocations are taken to face any potential

obligations that occur and are not specified in the amount of such Judicial claims and custom

falling investment prices, inventory depreciation, renewal of fixed assets or impairment of assets.

With regard to reserves, it is defined as an amount of money taken from the net profits to

achieve certain gains and objectives in that company, the company decides to withhold part of

profits as profits from shareholders to invest in a particular purpose, and must be

provided for in the company's statutes, or at the suggestion of the Board of Directors and its

purpose is to strengthen the financial position of the company, thus to increase shareholders'

equity, thus increase the confidence of creditors, such as legal reserves, reserves of fixed

asset prices, and reserve settlements determined by the company's management even.

Provide funding in the future.

The allocation is money taken from the revenue, and the reserve is part of the profits held for the purpose.

The allocation is the result of a shortfall of either an event or is likely to occur in the future, and the reserve is the result of profits taking part of it for certain potential targets.

Allocations are in accordance with a needed administrative or financial outlook, i.e. they are current liabilities, while reserves are composed of the rights of owners or a prerequisite for legal provisions obliged to form them.

The allocation is fixed in the income list, while the reserve is fixed in the distribution list.