Provisions

This query is : Resolved

ram manoj byna (Querist)
Follow

07 August 2015 what will be the effect on the profit and loss account if provision relating to any expenditure is not made ? what is difference is directly debiting a loss/expense & debiting a provision ? can any one explain me pls.

Shudhanshu Agrawal

Shudhanshu Agrawal (Expert)
Follow

07 August 2015 If provision is not created in the p&l a/c then profit or loss will be over stated or under stated as the case may be.

There is a difference between creating a provision and considering a loss or expenses. Provision is created for those cases where we are not sure of receipt of payment. But if we are sure of non receipt of payment then it is directly debited to expenditure a/c.