Provisions - Non-Current
Estimated amounts you will probably have to pay after a year, such as site restoration or long-term warranty, on the Balance Sheet.
In detail
A provision is a liability whose amount or timing is uncertain but whose cause already exists: restoring a leased site at lease end, a long-running court case, or a warranty on a multi-year contract. When the obligation will be settled after more than twelve months it is held here; nearer ones go to Provisions - Current. The estimate is posted by Journal Entry against an expense account, then revisited every Ashadh end and increased or released as the facts change. A provision is never a reserve for future losses the business merely fears; NFRS and the auditor allow it only for present obligations. Over-providing hides profit, under-providing hides a coming cash outflow.
Formula
Provision = Best estimate of the amount needed to settle the obligation, discounted when settlement is years away
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Miscellaneous Expenses | Rs 2,00,000 | |
| Provisions - Non-Current | Rs 2,00,000 |
How to record it in BRAccount
- 01Document the obligation and the best estimate of the cost in a note with supporting quotes.
- 02Go to Invoicing > Journal Entry > New dated the period end.
- 03Debit the relevant expense account and credit Provisions - Non-Current with the estimate.
- 04Submit. The entry below posts.
- 05Each Ashadh end, adjust the balance by Journal Entry and move amounts due within a year to Provisions - Current.
- 06When the cost is finally paid, debit this ledger and credit Bank.
When to use it
Post by Journal Entry at year end when the obligation is likely and can be estimated.
Example from the demo books
Dr Miscellaneous Expenses Rs 2,00,000, Cr Provisions - Non-Current Rs 2,00,000 for restoring a leased campsite at lease end.