Define the term provision

Define the term provision

PROVISION, generally, is to prepare in advance for an event that is projected to take place in the future. In accounting, it is an amount charged against profits for a specific liability (for example: bad debts, depreciation or taxes). A liability may be known, but the amount is often uncertain. This uncertainty may lead to an adjustment in a later income statement once the final amount of the liability is ascertained.


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