Hi sir,
I am An senior account assistant.
Please explain me provision and give me one example.
Regds,
Ehtesham
CA Priya
(CS Final)
(1049 Points)
Replied 27 March 2010
Provision of depreciation account is the account of provision of depreciation. First of all we should understand provision of depreciation .Provision of depreciation is the collected value of all depreciation .With making of this account we are not credited depreciation in asset account. But transfer every year depreciation to provision of depreciation account. Every year we adopt this procedure and when assets are sold we will transfer sold assets ‘total depreciation to credit side of asset account. For calculating correct profit or loss on fixed asset. This provision uses with any method of calculating depreciation.
There are following feature of provision for depreciation account
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Provision means an amount which is created from profits as a charge against profits.... It is created for a particular purpose and an amount so created has a certain level of certainity....
On the other hand, Reserves are just opposite to provisions... Reserves is an appropriation of profits. Its use is not restricted and the amount so created is purely uncertain i.e there is high degree of estimatiom....
for e.g.... Ms. Priya has very well explained...
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