Provision

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In financial accounting, provision is a word that creates an ambiguous account title. In U.S. GAAP, provision means an expense, while in IFRS, International Financial Reporting Standards, it means a liability. So, in the U.S., Provision for Income Taxes means the same thing as Income Tax Expense, while under IFRS, Provision for Income Taxes means Liability for Income Taxes Payable. Another examples is provisions for warranty costs [expense in the US and liability in IFRS]. Sometimes in IFRS, but not in US GAAP, the term reserve is used instead of term provision; such a use, however, is inconsistent with the terminology suggested by International Accounting Standards Board.^{[citation needed]} Reserve, which see, is the worst word in all of accounting as it connotes a debit balance to non-professionals but in accounting always means an account with a credit balance. Reserve for Warranties means estimated liability for future warranty repairs and replacements, NOT a pool of cash set aside for the firm to use in making repairs.

Provision: In IFRS, but not US GAAP, a present obligation which satisfies the rest of the definition of a liability, even if the amount of the obligation has to be estimated.

Provision can also be defined as the "liability of uncertain timing and uncertain amount" (Framework)

See also

• International Financial Reporting Standards
• IAS 37: Provisions, Contingent Liabilities and Contingent Assets

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Provisions are defined under the AS-29 of Indian Accounting Standards

Provision is a temporary accounting title. It basically refers to expense. Ex: If one of the expense is for the month of April and still not paid so to close that expense in that specific month, we prepare one temporary accounting title (provision) for that particular expense. while in the opening of that new month if that expence is paid, we reverse that provision in terms of recording expense and closing the provision title. Physically we can say that

30th april

                      Utility expense           5000
                            provision for Utility   5000
                      (Recording Utility Expense)

14th March

                      Provision for Utility      5000
                            Utility Expense         5000
                       (Write off Provision for Utility)