Difference between Provisions and Accruals

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CA Anshu Agarwal

CA Anshu Agarwal (Querist)
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13 March 2010 please any one clarify me the difference between Provisions and Accruals.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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13 March 2010 Before make provisions the expenses or liability has beed accured. so first accural then provisions

CA Anshu Agarwal

CA Anshu Agarwal (Querist)
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13 March 2010 para 12(b) prescribes the difference between Provisions and Accruals:

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.

this para has confused me.

CA Anshu Agarwal

CA Anshu Agarwal (Querist)
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13 March 2010 it prescribes that,
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.

if this is Accrual, what is provision.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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13 March 2010 You may take.Accural which is arrived accuratley based on the documents

Provision just estimation based on the expenses & income recognation

Madhusudan Bohra

Madhusudan Bohra (Expert)
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14 March 2010 Provision and accrual are both way of expensing out once the liability has accrued.

Provisions are also made only if the good & services have been received and the liablity has accrued.

If the liability can not be certainly be estimated then it becomes part of contingent liability.

CA Anshu Agarwal

CA Anshu Agarwal (Querist)
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17 March 2010 Can it be defined as below? (as per my understanding)
 Provisions are liability, measured with substantial degree of estimation, for which till the date of balance sheet Goods or services have not been received.
 Accruals are liability for the goods or services received till the date of balance sheet, but amount is not agreed exactly.

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