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What is meant by the provision in accounting?

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Question ajoutée par Adnan Mustafa , Credit Controller , National Refreshment Company LLC
Date de publication: 2013/06/16
Zeeshan Ali Soofi
par Zeeshan Ali Soofi , Accountant , Al Mona Auto Repair Workshop LLC

Setting aside a specific amount from income pertaining to the current accounting period to meet an uncertain liability or expenses in the future - See more at: http://www.accounting-world.com/2012/10/introduction-to-accounting-and-its.html#sthash.Ej3JvQZc.dpuf

Kamran Muhammad
par Kamran Muhammad , Parts Administrator , Samaco

shortly, provision is a reserve amount from income to meet future uncertain expenses or liabilities.

Khaja Moinuddin
par Khaja Moinuddin , Group Assistant Financial Controller , Confidential

In financial accounting, a provision is an account which records a present liability of an entity to another entity.
The recording of the liability affects both the current liability side of an entity's Balance Sheet as well as an appropriate expense account in the entity's Income Statement.
A provision can be a liability of uncertain timing or amount.
A liability, in turn, is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
" Provision is that action of business in which business organisation reserves his money for future losses for safeguarding business ."

Muhammad Waqas
par Muhammad Waqas , Accountant , Rafiq & Sons

Accounting rules require a company to review its operating data periodically and ensure that loans and customer receivable amounts are accurate. These rules include generally accepted accounting principles and international financial reporting standards.

Sohail Farooq
par Sohail Farooq , Project Accountant , F. H Enterprises

In accounting Provision or Reserve or Total are of two types "Capital Reserve" and "Revenue Reserve" Capital Reserve is usually generated to replace fixed assets or when the fixed asset is fully depreciated or it is also generated by the increase in the value of fixed asse (Asset Revaluation Reserve).
It can't be distributed as dividend to the share holders but only in the form of bonus shares.
On the other hand "Revenue reserve (General Reserve) is generated out of profit for Provision of depreciation, provision for bad and doubtful debts, provision for tax,, provision for contigent liability.
It can be distributed as dividend to the share holders.

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