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4th Question , 3rd part about provisions.
Can you please help me understand the difference between provisions charged and utilised during the year ?
Charge (in accounting) generally means expense to profit and loss (for anything – e.g. depreciation), For any provision – say for goods sold with a warranty for repairs – it is the making of the provision by Dr P&L Cr Provision that “hits” profit. When the goods are then returned for repairs, the repairs incurred are not expensed – that would be “double counting” – the provision is used/utilised by Dr Provision (Cr Cash)
A provision can only be utilised (used up) for the purpose for which it was created.
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