Provisions and Reserves

Liabilities side under Reserves and Surplus

Reserves appear on the liabilities side of the Balance Sheet under Reserves and Surplus.

It can be used for any future purpose

A general reserve has no specific purpose and can be used for any future need.

A reserve whose amount is invested outside the business

In a reserve fund, the amount set aside is actually invested outside the business.

A fund created by fixed yearly installments invested at compound interest

A sinking fund is built by yearly fixed amounts and interest so that the target amount is reached on maturity.