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provision accounts

  • Associate
  • Practice Licence
  • 164 posts
  • # 114791

Struggling to get my mind round provision accounts

When I set up a provision for something, I think I credit the provision account. But what do I debit?

All I can find is that the credit is offset by a reduction in profit in both profit/loss account and in balance sheet. I can understand that but something must take the debit entry.

... ponder, ponder ...

Just wondering if the provision a/c takes both credit and debit, credit for the balance sheet and debit for the p-l a/c ???

Thankyou

Peter

  • Member PM.Dip
  • Practice Licence
  • 36 posts
  • # 114792

Hi 

 

you debit the relevant expense account in the P&L

 

eg When making a provision for a bad debt

 

debit bad debt expense account 

credit provision for bad debts on the balance sheet






Edited at 06 Mar 2017 04:39 PM GMT

  • Associate
  • Practice Licence
  • 164 posts
  • # 114798

Thank you

It was a provision for a major repair to be done at some time in the future - long before I was around and was accounted for just as you say. I couldn't find it because I thought it was recent but turns out to be a good while ago.

Thank you



Edited at 08 Mar 2017 06:42 AM GMT

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