Provision is _______ against profit.
charge
The correct answer is option 4. Provision is a charge against profit. It is an expense recognized for future liabilities, and it is subtracted from the profit before the tax is calculated. Reserves, on the other hand, are created out of profits and are used for future business needs or contingencies.
Important Questions from Depreciation, Reserve & Provision
Which of the following statement is FALSE in relation to the term depreciation?
________ refers to writing off the cost of intangible assets like patents, copyrights, trademarks, franchises, and goodwill which have utility for a specified period of time.
Which of the following statement is FALSE?
Which of the following statement is NOT TRUE in regard to reserve and provision?
Match the following.
I. Depreciation
II. Unexpired expenses
III. Interest on capital
IV. Manager’s commission
1. Shown on assets side
2. Shown on debited side
3. Deducted from values of assets
4. Shown as addition to capital
