Why should we make provision

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CMA BABU.D (Querist)
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01 August 2008 Why should we make provision for each month/ year? if we not make a provision entry what is the impact of books of accounts. this is mandatory for AS, or if not, we are Voilation of any act. what is the clear purpose of provison entry? give some examples & impact of books of accounts? (whether prudence perpose we make a provision enty)

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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01 August 2008 The purpose of making provision within a period is to account for the expenditure relating to that period and the liability that has accrued within that period, so that the accounts show the true and correct view of the financial status as also the operating performance.

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