Difference Between Reserve and Fund

Reserve and funds are the two different items in the financial accounting and as such, they are treated quite utterly. In this following lines, we are differentiating Reserve and fund as follows:

Reserve  Fund 

1. It is created from the retained earnings,

2. It is a portion of owner's equity,

3. It represents a portion of liability or the profit,

4. It is represented on the balance sheet's credit side just below the equity,

5. It is made out of net profit and is a voluntary provision,

6. Reserve is actually come out as a result of appropriation of the retained earnings.

7. Normally, reserve has a credit balance,

8. On the financial accounts, it is shown as a part of retained earnings.

 

1. It is created from the cash,

2. Fund is a type of asset,

3. It represents the asset,

4. It is shown on the debit side of the balance sheet under the assets,

5. When cash is segregated, fund isone the item,

6. It has normally a debit balance,

7. It is not a part of retained earnings,