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Liability vs. provision of liability

CA. Abhishek K. Pandey (Manager (Advance)) (901 Points)

20 August 2012

Whats the diff between Liabilities and Provision for Liabilities.

If one go by dfinition as per AS 29, it seems like both are same.

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Giridhar S Karandikar (Team Lead) (7553 Points)
Replied 21 August 2012

Liability means which you incur during the same F.Y. and also square up in the same F.Y. However if the liability arises during one F.Y. and the same is squared up in the subsequent F.Y.'s then we are requried to make provision for the liability as the expenditure relates to the current F.Y. but th epayment is deferred to subsequent F.Y.(s)