Provision and Allowance

A provision is an estimated liability where the timing or the amount are uncertain and appears as a liability in the SOFP. An allowance is an estimated reduction in the value of an asset. For Paper FA, it is the allowance for receivables that is examined. As explained in my free lectures, the allowance for receivables relates to doubtful debts, and reduces the value of the receivables in the SOFP. Provisions and liabilities are both estimates due to the uncertainty of the timing or the amount and both result in a fall in the net assets of the business.

Thanks a lot Mr. Jhon Moffat

You are welcome :-)