1. It is an amount set
aside out of income or profits. It is retention of profit, made temporarily,
for a specific purpose.
2. The purpose, for which a provision is created, is to meet:
(a) an anticipated loss which has occurred
but the amount is not ascertained, or
(b) a known depletion or diminution in the value of an asset, or
(c) a liability which has been known to have arisen.
3. The exact amount of anticipated loss or the depletion in the value
of the asset, or the liability is not ascertained or ascertainable, at the time
of accounting. 4. It is a charge to Profit and Loss Account.
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