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Hello!
I wonder, if I create provision for $100K in 2013, and in 2014 I realize that it was overstated, thus, I need to reverse unused amounts ($40k). Should I post this amount as DR Provision(liability) and CR Expense?or should I credit Retained Earnings?This question would have been better posted on the Ask the Tutor page!
Credit expense “Provision no longer required”
However, in all probability, this title will rarely appear as an income in the statement of profit or loss. It’s going to be an unusual situation where a provision reversal is lower than this current year expense.
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You should credit it to the same line that the original provision was charged – in most cases this would probably be admin expenses unless it is an exceptional item when a separate line is required.
Thank You! In my case it is Operating Expense, which is a part of CoS. I was confused because the company increases provision liability each year, e.g:
provision
OB: 300k
Reversal PY: -50k
CY provision 150k
CB : 400KThus, I was wondering in CY should I expense 100k or 150k and increase PY RE.
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