Here we detail about the difference between reserve and reserve fund.
1. Reserve is the amount set aside out of profits and other surpluses.
2. The basic purpose of keeping reserve is to meet any contingent liability
3. As the amount of reserve is not kept outside the business in any form so the question of selling does not arise.
1. Reserve fund is the amount of reserve which is invested in outside securities.
2. The basic purpose is to earn regular income from securities.
3. There may be profit or loss on sale of investments in which the amount of reserve is invested outside the business.