Provisions - Current
Estimated amounts you will probably pay within a year, such as a pending customer refund or a disputed bill. On the Balance Sheet.
In detail
A current provision is a present obligation expected to be settled within twelve months whose exact amount is still estimated: a likely refund on a cancelled tour or a disputed supplier claim. The estimate is charged to an expense and credited here, so the period that caused the cost carries it. When the matter is settled, the payment is debited to this ledger and any difference between estimate and actual is written back to the same expense. Provisions are revisited every month end; an old provision never used should be released, not left to pad the Balance Sheet. The IRD generally allows a deduction only when the cost is actually incurred, so keep tax workings separate.
Formula
Provisions - Current = Opening + New estimates - Payments - Amounts released
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Miscellaneous Expenses | Rs 40,000 | |
| Provisions - Current | Rs 40,000 |
How to record it in BRAccount
- 01Note the event, the probable cost and the evidence, such as emails and booking terms.
- 02Go to Invoicing > Journal Entry > New dated the period end.
- 03Debit the matching expense account and credit Provisions - Current with the estimate.
- 04Submit. The entry below posts.
- 05On settlement, post a Journal Entry: Dr Provisions - Current, Cr Bank; release any excess back to the expense.
- 06Review open provisions each month on Financial Reports > General Ledger.
When to use it
Post by Journal Entry when the obligation is probable and the amount can be estimated. Reverse when settled.
Example from the demo books
Dr Miscellaneous Expenses Rs 40,000, Cr Provisions - Current Rs 40,000 for a likely refund on a cancelled Mustang tour.