Question

Provisions are

• A. External transactions
• B. Internal transactions
• C. both (a) and (b)
• D. None of these

Answer 1

Answer:

B. Internal transactions

Provisions are created from the company’s own profits to meet known liabilities or anticipated losses. They do not involve cash outflow immediately, so they are internal adjustments within the business. Example: Provision for doubtful debts, provision for taxation.