The document discusses provisions in accounting and their treatment. It defines a provision as an amount set aside from profits for a known liability, even if the exact amount is unknown. It lists common types of provisions like provisions for bad debts, depreciation, taxes, and discounts. Provisions are created to meet anticipated and known losses and liabilities, and to present accurate financial statements. The document includes an example journal entry to record provisions and a sample balance sheet showing how provisions are reported.

1. Provisions in
Accounting and
Treatment
Thereof.
Presented by,
Amit Sekhar

2. What is Provision?
An amount set aside from profits in the
accounts of an enterprise for a known liability,
though the specific amount of the liability may
not be known, or for the diminution of the
value of an asset.

3. Types of Provisions
 Provision For Bad Dept.
 Provision For Depreciation.
 Provision For Tax.
 Provision For Discount on Debtors.
 Provision For Repair and Renewals.

4. Objectives/Need for provisions.
To Meet Anticipated Losses And Liabilities
Provisions are created for meeting anticipated losses and
liabilities such as provision for doubtful debts, provision for
discount on debtors and provision for taxation.
To Meet Known Losses And Liabilities
Provisions are created for meeting known losses and
liabilities such as provision for repair and renewals.
To Present Correct Financial Statements
In order to present correct financial statements and to report
true profit and financial position, the business must maintain
provision for known liabilities and losses.

5. Treatment
In the Books of Abhishek
Dr. Profit & Loss Account Cr.
Particulars Amt. (₹) Particulars Amt.(₹)
To salaries 10,000 By Gross profit 95,000
To rent 5,000 By interest 5,000
To prov. For bad debt 2,500
To Depreciation 5,000
To Provision for tax 2,500
To Net profit 75,000
1,00,000 1,00,000

6. BALANCE SHEET (As on 31/3/14)
LIBILITIES Amt (₹) ASSETS Amt(₹)
Capital 1,25,000 Plant & Machinery 105,000
Add: Net Profit 75,000 2,00,000 Less: Depreciation 5,000 1,00,000
Loan 50,000 Furniture & Fixture 50,000
Creditor 10,000 Debtor(Nishant) 5,000
Bills Payable 5,000 Less: Prov.for doubtful debt 2,500 2,500
Out standing expenses 2,500 Cash 50,000
Bank 65,000
2,67,500 2,67,500