Provision examples

Indian Accounting Standards 342 views 5 replies

Hi, out of the below

Warranties

Legal

Environmental

Decommissioning

Bad debt

out of the above,  a debit to asset or P&L is given to create a provision, is there any possibility for me to create a provision out of retained earning earnings or reserves? 

Eg. I have a sinking fund, and recently someone me filed a lawsuit on me for contaminating his fields. I’m gonna loose the case.

Sinking fund reserve/ retained earnings a/c

To Provision liability

and when I have to paid money to the farmer

Provision Liability a/c

To Bank a/c

What difference would it make? Is Provision an allowable expense?

Txs

 

 

 

Replies (5)

A provision should be recognised when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations or

(c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision should be recognised.

Bad debt provision is tax allowable, similarly is legal provisioning tax allowable?

yes. But it must be pertaining to business legal expenses

Alright, that gives an obligation to recognise it in Profit or Loss 

Provision for bad debts is not an allowable deduction under income tax act.


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
22 May 2026
U.S. Financial Reporting & Consolidation Manager

Karia Overseas

Ahmedabad

CA

View Details
Company
ARTICLESHIP 04 June 2026
Article

Rakhecha & Co.

New Delhi

CA Inter

View Details
Company
19 May 2026
Accountant

ca kunjan

Mumbai

CA Inter

View Details
Company
Featured 15 June 2026
Senior Auditor

N. Dhawan & Co

New Delhi

CA Inter

View Details
Company
26 May 2026
Senior Accountant cum purchase Manager

Vardhaman Group of India

Pimpri Chinchwad

CA Inter

View Details
Company
Featured 26 May 2026
Account Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
04 June 2026
Semi Qualified CA

Goyal Puneet & Associates

New Delhi

CA Final

View Details
Company
29 May 2026
Finance Head

Bhawar Sales Corporation

Chennai

Graduate (Any)

View Details