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Provisions

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What is provision,

can I make provision on electricty bill & other utilities.If yes how

Replies (3)

Yes, you may. But, what's the benefit you won't get deduction in income tax.

Provision are same as reserves but upto some extent .It can be created for any specific purpose or any expenses which will/might occur in future.Take the example of Prov for Bad debts.. whixh are just ascertained on the basis on past performance to secure the future losses.

But it is not distributable as reserves. It is created out of profits which are above the line.

If you have the proper electricity bill which is not paid, then it will be  'outstanding electricity expenses'

otherwise you can make the provision on the basis of past bills.

Provision can be made for all those expenses where the nature of expense is known but the exact amount is not known.

provision is charge against profit where as reserve is application of profit.

 


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