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Provision

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(Querist)
19 August 2011 sir ........i dont understand the provision .why it is created? provision for distribution bill, exp wht is the purpose of creating??
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CMA Ramesh Krishnan

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CMA Ramesh Krishnan (Expert)
19 August 2011 As per the Accrual system of accounting the Income & Expenditure need to be accounted actually when they incurred, example the telephone bill for the period of July-11 need to be accounted in July-11 only, but some cased bills are not received in the same period, it will come subsequent period say in August, but accrual system we need to book the expenses in the July itself, such as case based on estimation we need to create provision for the particular expenses. basic objective is to find out & show the correct Profit & Loss for the particular period which booking actual expenses & income for the period
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Aarav jain

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Aarav jain (Querist)
20 August 2011 thnx.......bt how we ll accounted in the books?? in your case assume july bill came 5000 and u hav made provision of rs.4500/5500.
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