Question

A provision is a/an ___________.

• A. appropriation of profit
• B. charge on the profit
• C. investment
• D. current asset

Answer 1

Answer: (B)

charge on the profit

Charge on the profit.

Provision is an amount set aside, by charging it to profit and loss account 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 an estimate basis. In other words, a provision is a charge against profit for the purpose of providing any liability or loss.