Question

A ____________ is a liability which can be measured only by using a substantial degree of estimation.

• A. Provision
• B. Non-current liability
• C. Current liability
• D. Contingent liability

Answer 1

The correct option is A Provision

Provision is an amount set aside, by charging it to Profit and Loss A/c or Statement of profit and loss, to provide for a known liability, the amount of which cannot be determined with accuracy. It is charged in the profit and loss account on estimate basis. In other words, a provision is a charge against profit for the purpose of providing for any liability or loss. Provision for depreciation, provision for doubtful debts, provision for repairs are few examples of provisions.