provisions

Leyla is correct.
However in most cases these days it is effectively the same as an accrual. The only real difference is that usually with an accrual we know the amount we are owing, whereas with a provision we are estimating what might be owed.

Say you have four vendors; The vendors are called A, B, C,D. In a recent news from your competitor you heard vendor A’s working capital loan was not approved by the bank. In this case your sure that vendor A will unable to pay off its receivables. In this case you make specific provision against vendor A writing off the entire balance due. However, when you are closing monthly accounts your company policy might create provisions using % baisis…i.e company policy states 5% allowance for bad debt on receivable balance. Thus in the general provision you are creating a provision for B.C and D vendors which is a general allowance or general provision.. Hope this helps