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+--- Thread: Provision, reserves and funds (/showthread.php?tid=6013)
Provision, reserves and funds - irfan kazim - 06-20-2009
AOA, brothers and sisters
What is difference between provision, reserves and funds, with definition and solid example that make my concept more clear.
- faisal_desperado - 06-21-2009
A <b>provision</b> is an unanticipated liablity or loss, which is charged against profits,
The actual liablity is uncertain unless there is a reasonable accuracy with regards to that item,
Example includes,
Provision for Taxations.( Liablity remains uncertain untill end of the period)
Provision for doubtful debts.(sometime further provision is required to be provided at the end while some time already provided provision proves more than sufficient)
provision for depreciation( Asset is subject to obsolesce, or any contingency may arise which results change in allowances)
<b>Reserve</b> is an amount of profit set aside untill it is needed for some particular purpose, a reserve may be created for Contingencies, Plant, Building or any unavoidable contingent loss.
<b>Fund </b> is a cash or cash equivalent, cash(Fund) may be invested in assets which could generate some profits i.e. securities,which could easily be converted into cash.or
Funds may be cash or asset which is sets aside to attain specific objective.
<b>Provisions and Reserves do not require cash and its equivalent to be set aside while funds require cash to be reserved.</b>
Best Regards,
- Owais Bhai - 06-25-2009
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by faisal_desperado</i>
<br />A <b>provision</b> is an unanticipated liablity or loss, which is charged against profits,
The actual liablity is uncertain unless there is a reasonable accuracy with regards to that item,
Example includes,
Provision for Taxations.( Liablity remains uncertain untill end of the period)
Provision for doubtful debts.(sometime further provision is required to be provided at the end while some time already provided provision proves more than sufficient)
provision for depreciation( Asset is subject to obsolesce, or any contingency may arise which results change in allowances)
<b>Reserve</b> is an amount of profit set aside untill it is needed for some particular purpose, a reserve may be created for Contingencies, Plant, Building or any unavoidable contingent loss.
<b>Fund </b> is a cash or cash equivalent, cash(Fund) may be invested in assets which could generate some profits i.e. securities,which could easily be converted into cash.or
Funds may be cash or asset which is sets aside to attain specific objective.
<b>Provisions and Reserves do not require cash and its equivalent to be set aside while funds require cash to be reserved.</b>
Best Regards,
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
- Owais Bhai - 06-25-2009
What is Deferred Tax Reserve as used in NBFC Rules/Regulations? Is it different from Deferred Tax Liability, which is charged to P/L and not an appropriation
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by faisal_desperado</i>
<br />A <b>provision</b> is an unanticipated liablity or loss, which is charged against profits,
The actual liablity is uncertain unless there is a reasonable accuracy with regards to that item,
Example includes,
Provision for Taxations.( Liablity remains uncertain untill end of the period)
Provision for doubtful debts.(sometime further provision is required to be provided at the end while some time already provided provision proves more than sufficient)
provision for depreciation( Asset is subject to obsolesce, or any contingency may arise which results change in allowances)
<b>Reserve</b> is an amount of profit set aside untill it is needed for some particular purpose, a reserve may be created for Contingencies, Plant, Building or any unavoidable contingent loss.
<b>Fund </b> is a cash or cash equivalent, cash(Fund) may be invested in assets which could generate some profits i.e. securities,which could easily be converted into cash.or
Funds may be cash or asset which is sets aside to attain specific objective.
<b>Provisions and Reserves do not require cash and its equivalent to be set aside while funds require cash to be reserved.</b>
Best Regards,
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
- faisal_desperado - 06-26-2009
My dear,
Deferred Tax Reserve, although related to the deferred tax liablity but they may not be complected with each other,
Deferred Tax Liablity arises when there is a differentiation in between Carrying Value of an asset with its Tax base, i.e. Carrying value of an asset is more than its Tax Base, on the other hand as per <b>Circular No. 16 of 1999 dated September 09, 1999 regarding compliance with the IAS â 12 (Revised)</b> Through the said circular, Leasing companies were allowed to fully provide for the un-recognized deferred tax liability as at the beginning of the financial year ending June 30, 1999 were granted a relaxation by way of transfer of an amount to a capital reserve over a period of five years ending June 30, 2003.
The capital reserve so created was not to be utilized for any purpose other than to provide for deferred tax liability.
However, afterward , as per <b>CIRCULAR NO. 8 OF 2004</b> it was proposed that, "It is hereby clarified that the aforesaid capital reserve which represents deferred tax liability, which has been recognized over a period of five years and such transfer was allowed to enable the company to have sufficient profits available when the requirements of IAS-12 (Revised) become applicable on expiry of the extended time period i.e. June 30, 2003. Accordingly, such amount cannot be treated as reserve any longer and should be classified/disclosed as liability. In order to comply with the requirements of IAS - 12 (Revised) with effect from 1 July 2003, the leasing companies should record the deferred tax liability in net profit or loss for the period,in accordance with the requirements of IAS - 8, Fundamental Errors and Changes in Accounting polices.
Best Regards,
- Spectator - 10-03-2009
Faisal bhai, If a provision for repairs account is created, Should the balance on the provision be shown as capital reserve or a deferred liability after the purpose has been accomplished ?
Others can also share their knowledge !!!
Yasir
- Spectator - 10-06-2009
can any other reply for this ?
Kamran bhai may u answer ?
faisal bhai i have just read in one of the threads that you dont contribute in any other forum except tax & accounts/audit.
i sent u an email , if possible plz reply
- faisal_desperado - 10-14-2009
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Spectator</i>
<br />Faisal bhai, If a provision for repairs account is created, Should the balance on the provision be shown as capital reserve or a deferred liability after the purpose has been accomplished ?
Others can also share their knowledge !!!
Yasir
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Dear Spectator,
I have not received any email from you.
As far as your query is concerned, If actual Repair expense exceeds already provided provision, then difference should be shown as expense. However, if actual expense are lesser than provision then provision is to be shown as current liablity unless the same is fully utilised or purpose is ceased.
Regards,