What is a provision in accounting?

A provision is a probable expense that the company anticipates and records in accounting to cover a future risk.

Examples of Provisions

• Litigation: ongoing legal proceedings
• Doubtful receivable: risk of non-payment by a customer
• Warranty: estimated cost of repairs
• Tax risks

Provisions appear in the tax filing package and impact the accounting result.

To learn more:

• Expenses
• Balance sheet
• Customer receivables