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Provisions on year end

rohityadav (article) (27 Points)

19 June 2023

Dear All,

Can anyone guide me on the provisions, can provisions be made on each and every expenses like ,electricity, security expenses, repairs and maintenance expenses, etc ..................

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6 Replies

RAJA P M ("Do the Right Thing...!!!") (128091 Points)
Replied 19 June 2023

It's simply make based on the next months closeable expenses...

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rohityadav (article) (27 Points)
Replied 20 June 2023

Thanks sir,

But can we make provision on all expenses?

rohityadav (article) (27 Points)
Replied 20 June 2023

Suppose I had one expense say refreshment expenses due on 31/03/23, of which creditor is paid in June still I can make provision?

Yasaswi Gomes new (Finance ) (4514 Points)
Replied 21 June 2023

As 29:17 Financial statements deal with the financial position of an enterprise at

the end of its reporting period and not its possible position in the future.

Therefore, no provision is recognised for costs that need to be incurred to

operate in the future. The only liabilities recognised in an enterprise’s balance

sheet are those that exist at the balance sheet date.

So, this AS standard is sometimes complex to interpret cause it has many Paras which suggests accruals and payables can't be provisions and It is only those obligations arising from past events existing.

independently of an enterprise’s future actions (i.e. the future conduct of its

business) that are recognised as provisions. Examples of such obligations

are penalties or clean-up costs for unlawful environmental damage, both of

which would lead to an outflow of resources embodying economic benefit's

So on the whole when a past event triggers an outflow which must be settled is a provision.

As 29: 12. A:b is also a good one. Other standards demistify this clearly for example Indas.

because in the measurement of provisions substantial
degree of estimation is involved with regard to the future expenditure required
in settlement. By contrast:
(a) trade payables are liabilities to pay for goods or services that have
been received or supplied and have been invoiced or formally
agreed with the supplier; and
(b) accruals are liabilities to pay for goods or services that have been
received or supplied but have not been paid, invoiced or formally
agreed with the supplier, including amounts due to employees.
Although it is sometimes necessary to estimate the amount of
accruals, the degree of estimation is generally much less than that
for provisions.

Degree of estimation varies it seems. To interpret it's cumbersome.

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