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Why provisions are made & what will be the Journal entry
for different types of provisions.
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Answer Posted / acca
AS per IAS 37 , provision is a liability with the uncertain amount and timing.
recognized provision as Liability when these condition meet.
1)Present obligation: under which consider two obligation legal obligation and constructive obligation.
2) Past event
3) future outflow of cash is probable
4) the amount of provision can be measure reliably at the time of book provision.
As per IAS 37 can be recognized certain things as provision.
Doubtull debt
depreciation
in the case of gratuity:at the time of occurs
Dr: Gratuity Exp a/c
Cr: provision for gratuity a/c
provision of liability should be account in the statement of financial position at the present value if its beyond more than one year.
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