November 7, 2014

Provisions and liabilities: Do you know the difference?

Provisions and liabilities – words that are often used interchangeably but for accounting purposes they are not the same. To determine whether expenditure is a provision or a liability depends on the certainty, timing and amount of the expenditure. The classification of provisions and liabilities depends on the answers to the questions as set out in the table below:   The definitions of the different provisions and liabilities are discussed in more detail below, together with an example of each one. Provisions A provision is a present obligation for future expenditure of which the amount can be estimated reliably but where […]
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