Question

Write these characteristics of provision​

Answer 1

Answer:

The characteristics of a provision are that it is a liability where there is uncertainty as to either the timing of settlement or the amount to be settled. ... The fact that it is difficult to measure a provision and that estimates have to be used does not mean that the provision is not reliably measurable.

Answer 2

ANSWER :

✯ The characteristics of Provision are :-

• [1] Provision is made to meet a known liability or loss the amount of which may not be exactly ascertained.

• [2] Although the provision made for the liability is known, the amount of sustainability cannot be determined with reasonable accuracy.

• [3] 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.

• [4] 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.

• [5] Provision helps in ascertaining the true net profit or net loss of the business and hence in ascertaining the true financial position of the business.

MORE INFORMATION :

✯ Provision :-

• 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.

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.