Question

following statement is true or not : "provision is a charge against the profit , it is made to meet know liability or contigency when amount is not determined ".​

Answer 1

Answer:

TRUE ❤️ YAAR THATS TRUE MAN

Answer 2

ANSWER :

The statement is :-

• Provision is a charge against the profit. It is made to meet know liability or contigency when amount is not determined.

★ This statement is True.

• ❒ The term "Provision" refers to an estimated amount, setting aside to meet certainly known liability or loss, the amount of which may not be exactly ascertained.

• ❒ Provision is a charge against profit and as such the creation of provision reduces the profits or increases the loss of the year in which it is created.

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EXPLANATION :

❍ Provision is made to meet a known liability or loss the amount of which may not be exactly ascertained. Although the provision made for the liability is known, the amount of sustainability cannot be determined with reasonable accuracy. Provision is created even if there is loss and for the purpose of making provision, the amount of provision to be made is debited to the Profit and Loss Account in order to ascertain the correct profit.

Acccording to Companies Act, 1956, the term Provision refers to any one of the following amounts :

• (i) The amount written off are retained by way of providing for depreciation renewals and diminution in the value of asset, or

• (ii) The amount retained by way of providing for any known liability the amount of whose cannot be determined with substantial accuracy.