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WAEC Financial Accounting 2004 Question 12

Question 12

Bad Debts and Provisions

The amount set aside out of profit for a specific purpose is

  1. A.provision
  2. B.reserve
  3. C.depreciation
  4. D.depletion.
Show the answer and explanation

Answer: A (provision)

Explanation

In the WAEC syllabus a provision is an amount set aside out of profit for a specific purpose, such as a known loss or liability (e.g. bad debts, depreciation); a general reserve is kept back for no specific purpose.