Provisionals

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SRINIVAS (Querist)
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19 April 2014 Dear sir .......
what is provisional balance sheet & profit and loss account, what's the reason behind their preparation?

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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19 April 2014 Provisional balance sheet & Profit and loss account means the balance sheet & Profit and loss account prepared for the period shorter than one year, means if the balance sheet & profit and loss account prepared before to the date of closing of books of accounts then it called provisional balance sheet.

For example: Company A maintaining its books of accounts commencing from 1st April and closing by 31st Mar every year and if it is prepared balance sheet & profit and loss account on any date between 1st April to 30th march then it is called provisional balance sheet and provisional profit & loss account.

Another example: Company B maintaining its books of accounts commencing from 1st Jan and closing by 31st Dec every year and if it is prepared balance sheet & profit and loss account on any date between 1st Jan to 30th Dec then it is called provisional balance sheet and provisional profit & loss account.
As a definition we can say if a balance sheet & profit and loss account prepared on a date between the dates of two accounting year closing dates shall called as provisional balance sheet and provisional profit and loss account.

Reason behind their preparation is:

1) To know about the business statistics as on the date of their preparation
2) To know about the achievement of business targets in that year and to know about to be achieve during the remaining period
3) To compare business progress with the earlier year's targets and to take decisions to improve its activities
4) And so many reasons like this.