Okuzeka
Accounting & Tax vocabulary · Assets, Liabilities & Equity

Provision

Meaning in accounting & tax, with examples

/prəˈvɪʒn/nounCommon term

In accounting & tax, provision means: A liability recorded for an expected future cost whose exact amount or timing is uncertain, such as a lawsuit, warranty claims or restructuring.

In Turkish: karşılık

How it is used

Companies make, book, increase or release provisions. Under IFRS a provision needs a present obligation, a probable outflow and a reliable estimate. Allowances for doubtful debts are also loosely called provisions.

Example sentences

  1. We booked a provision of 5 million lira for the pending court case.

  2. The warranty provision is based on the claim rate of the last three years.

Common collocations

  • make a provision
  • release a provision
  • provision for doubtful debts
  • warranty provision
  • liabilityAn amount a business owes to others, such as suppliers, banks, employees or the tax office, which it will have to settle in the future.
  • bad debtMoney owed by a customer that the company no longer expects to collect, for example because the customer has gone bankrupt.
  • impairmentA fall in the value of an asset below the amount shown in the books, recorded as a loss so that the asset is not overstated.
  • accrued expenseA cost that belongs to a period but has not yet been invoiced or paid, recorded as an expense and a liability so the period shows its true cost.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Assets, Liabilities & Equity

Practise with graded reading

Reading at the right level is the fastest way to make new words stick. Pick free English books by level:

This page explains English vocabulary for learners. It is not financial advice.