 |
| Corporate practice bd |
A provision for expenses is an accounting practice in which a company sets aside a certain amount of money to cover anticipated expenses that are not yet incurred or invoiced but are expected in the future. This practice ensures that the company's financial statements accurately reflect the liabilities and expenses for the period they pertain to, rather than the period they are paid.
Importance of Provisions for Expenses
Accurate Financial Reporting: Ensures that expenses are recorded in the period they are incurred, providing a true and fair view of the financial position.
· Liability Management: Helps in managing future liabilities by setting aside funds in advance.
· Compliance: Ensures compliance with accounting standards, which require expenses to be recognized when they are incurred, not when they are paid.
· Budgeting and Planning: Assists in better financial planning and budgeting by anticipating future expenses.
Here are some Examples of provisions for Expenses:
Table of contents:
01. Provision for Festival Bonus:
· Head office Festival Bonuses (1-2)
· MD SIR, Vice Chairman SIR & Director SIR, Festival Bonuses (3-4)
· Factory Festival Bonuses (5-6)
Arrear Festival Bonuses Paid for Officer (7-8)
09. Provision for director remuneration(9-10)
10. Provision for Earned Leave(11-12)
11. Provision for Final Settlement(13-14)
12. Provision for Gas Bill(15-18)
13. Provision for Mobile Bill(19-20)
14. Provision for Insurance Premium(21-22)
15. Provision for salary & Allowances(23-24)
16. Provision for Gratuity Expense(25-26)
17. Provision for Fees & Charges(27-28)
18. Provision for Interest on Bank Loan(29-30)
19. Provision for Warranty Expenses(31-32)
20. Provision for Bad Debts(33)
21. Provision for Income Tax
Let’s start with Accounting Treatment with a Practical Example:
Practical Example-01
Provision for Head Office Festival Bonus:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
250000 |
|
|
|
Provision for Festival Bonus |
|
250000 |
|
|
|
Total Amount (TK.) |
250000 |
250000 |
Narration:
To record Provision for the Head Office Festival Bonus.
Practical Example-02
Payment by cash again, Head office Festival Bonuses:
Cash Payment Voucher (HO)
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Festival Bonus |
250000 |
|
|
Cash in hand (H.O) |
|
250000 |
|
|
|
Total Amount (TK.) |
250000 |
250000 |
Narration:
To record Payment against the Festival bonus for Eid-Ul-Fitr 2025 as per the attached supporting documents
Practical Example-03
Provision for Festival Bonuses MD SIR, Vice Chairman SIR & Director SIR:
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Bonus Administration |
8,50,000 |
|
|
Provision for Festival Bonus |
|
8,50,000 |
|
|
|
Total Amount (TK.) |
8,50,000 |
8,50,000 |
Narration:
To record Provision for Festival Bonus of MD SIR, Vice Chairman SIR & Director SIR:
Practical Example-04
Payment by cash against Festival Bonuses for MD SIR, Vice Chairman SIR & Director SIR:
Cash Payment Voucher (HO
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Festival Bonus |
8,50,000 |
|
|
Cash in hand (H.O) |
|
8,50,000 |
Narration:
To record payment against Festival Bonuses for MD SIR, Vice Chairman SIR & Director SIR:
Practical Example-05
Provision for Factory Festival Bonuses Against Eid-Ul-Azha-2025
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Bonus Administration |
3,50,000 |
|
|
4,50,000 |
|
||
|
2,50,000 |
|
||
|
1,50,000 |
|
||
|
Provision for Festival Bonus |
|
12,00,000 |
|
|
Total Amount (Tk) |
12,00,000 |
12,00,000 |
Narration:
Provision for Executive, Officers' Staff, Technical Workers' & Production Workers' Festival Bonuses Against Eid-Ul-Azha-2025
Practical Example-06
Payment for Executive, Officers' Staff, Technical Workers' & Production Workers against Festival Bonuses of Eid-Ul-Azha-2025
Cash Payment Voucher (FO)
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Festival Bonus |
12,00,000 |
|
|
|
Cash in hand (H.O) |
|
12,00,000 |
|
|
Total Amount (Tk) |
1200000 |
1200000 |
Narration:
To record the Payment for Executive, Officers' Staff, Technical Workers' & Production Workers against the Festival Bonuses of Eid-Ul-Azha-2025
Practical Example-07
Provision for Arrears of Festival Bonus for MR.X Rahman (Accounts Officer) Against Eid-Ul-Azha-2025.
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Bonus Administration |
20000 |
|
|
Provision for Festival Bonus |
|
20000 |
|
|
Total Amount (Tk) |
20000 |
20000 |
Narration:
Provision for Arrears of Festival Bonus for MR.X Rahman (Accounts Officer) Against Eid-Ul-Azha-2025.
Practical Example-08
Payment of Arrear Festival Bonus to MR.X Rahman (Accounts Officer) Against Eid-Ul-Azha-2025 in cash
Cash Payment Voucher (FO)
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Festival Bonus |
20000 |
|
|
Cash in hand (H.O) |
|
20000 |
|
|
Total Amount (Tk) |
20000 |
20000 |
Narration:
To record the Payment of the Arrear Festival Bonus to MR.X Rahman (Accounts Officer) against Eid-Ul-Azha-2025 in cash
Practical Example-09
Provision for director remuneration after AIT deduction for July 2025.
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
27.9.2025 |
Director remuneration |
4,50,000 |
|
|
Provision for Director remuneration: |
|
4,38,000 |
|
|
|
MR.X Rahman, Director AIT |
|
12,000 |
Narration:
To Record provision for director remuneration after AIT deduction for July 2025.
Practical Example-10
Payment against director remuneration: Tk.4,38,000 by Cheque, Cheque No.***** date.28.07.2025
Bank payment Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
27.9.2025 |
Provision for director remuneration: |
4,38,000 |
|
|
ABC Bank LTD SND#A/C#-5590 |
|
4,38,000 |
Narration:
Paid Vide Cheque No.**** dt.. 28.07.2025 pay to MR. Chowdhury (director) (ABC Group of Companies) against the monthly honorarium for July 2025
Practical Example-11
Provision for Earned Leave:
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Leave Pay-Admin |
200000 |
|
|
Provision for Earned Leave: |
|
200000 |
|
|
|
Total Amount (TK.) |
200000 |
200000 |
Narration:
To Record Provision for Earned Leave dated 25.08.2024
Practical Example-12
Payment against Provision for Earned Leave:
Cash Payment Voucher (HO)
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Earned Leave |
200000 |
|
|
Cash in hand (H.O) |
|
200000 |
|
|
|
Total Amount (TK.) |
200000 |
200000 |
Narration:
To Record Payment against Provision for Earned Leave:
Practical Example-13
Provision for Final settlement against Mr.X Rahman (Assistant production officer)
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Gratuity Expense (staff, officer, executive) |
297500 |
|
|
Leave pay-Factory |
4667 |
|
|
|
Salary & allowances Production Department |
1790 |
|
|
|
Provision for salary & Allowance |
|
1790 |
|
|
Provision for Earned Leave |
|
4667 |
|
|
Provision for Gratuity Expense |
|
297500 |
|
|
Total Amount (TK.) |
303957 |
303957 |
Narration:
To record the Final settlement bill, pay to Mr.X Rahman (Assistant production officer)
Practical Example-14
Payment against the Final settlement of Mr. X Rahman (assistant production officer) by A/C payee Cheque.
Bank payment Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Gratuity Expense |
297500 |
|
|
Provision for salary & Allowances |
1790 |
|
|
|
Provision for Earned Leave |
4667 |
|
|
|
ABC Bank LTD SND#5860 |
|
303957 |
|
|
Total Amount (TK.) |
303957 |
303957 |
Narration:
To record payment against the final settlement of MR X Rahman (assistance production officer) by our SND# Account Cheque no, ***** dt.. 25.08.2024
Practical Example-15
Provision for Gas Bill for January 2024 (supply of gas 500250 Cubic meters @TK.26.09
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
01.01.2025 |
Gas Bill |
13,50,000 |
|
|
Provision for Gas Bill |
|
13,50,000 |
|
|
|
Total Amount (TK.) |
13,50,000 |
13,50,000 |
Narration:
To record Against Provision for Gas Bill for January 2025 (supply of gas 500250 Cubic meter @TK.26.09 & Demand charge, Surcharge & RMS rent, etc. Bill no, **** Last payment date. -******
Practical Example-16
Treasury Challan AIT (3%) Deposit Against Govt Challan for January 2025
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Gas Bill |
40500 |
|
|
Titas Gas T & D Co. LTD. AIT Deduction |
|
40500 |
|
|
|
Total Amount (TK.) |
40500 |
40500 |
Narration:
To record Treasury Challan AIT (3%) Deposit Against Govt Challan for the Month of January 2025 Bill no, **** Last payment dt. -******
Practical Example-17
Payment Against Treasury Govt Challan AIT (3%) by Cheque Transfer for January 2025
Bank Payment Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Titas Gas T & D Co.Ltd AIT Deduction |
40500 |
|
|
ABC Bank Ltd. SND#5760 |
|
40500 |
|
|
|
Total Amount (TK.) |
40500 |
40500 |
Narration:
To record Payment Against Treasury Govt Challan AIT (3%) by Cheque Transfer for January 2025
Practical Example-18
Payment Against Gas Bill after deduction @3% AIT from our CD# A/C -**** (ABC Bank) for January 2024 (supply of gas 500250 Cubic meter @TK.26.09 & Demand charge, Surcharge & RMS rent ete Bill no, **** Last payment dt. -******
Bank Payment Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Gas Bill (Net) (13,50,000-40,500) |
13,09,500 |
|
|
|
13,09,500 |
||
|
|
Total Amount (TK.) |
13,09500 |
13,09,500 |
Narration:
To record Payment Against Gas Bill after deduction @3% AIT for January 2024 (supply of gas 500250 Cubic meter @TK.26.09 & Demand charge, Surcharge & RMS rent etc.) Bill no, **** documents against payment dt. -******
Practical Example-19
Provision for Executive officers & staff mobile bill for January, 2025
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
20.01.2025 |
Mobile Bill-Mr.X Rahman |
400 |
|
|
Mobile Bill-Mr.B Rahman |
1500 |
|
|
|
Mobile Bill-Mr.C Rahman |
2000 |
|
|
|
Mobile Bill-Mr.D Rahman |
1000 |
|
|
|
Mobile Bill-Mr.M Rahman |
500 |
|
|
|
Mobile Bill-Mr.N Rahman |
800 |
|
|
|
Mobile Bill-Mr.XRRahman |
900 |
|
|
|
Provision for Mobile Bill |
|
7100 |
|
|
Other Income |
|
150 |
|
|
|
Total Amount (TK.) |
7250 |
7250 |
Narration:
Provision for Executive officers & staff mobile bill for January, 2025
Practical Example-20
Payment against the mobile bill for January 2023 as per the attached supporting.
Cash Payment Voucher (Head Office)
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Mobile Bill |
7100 |
|
|
Cash in Hand (HO) |
|
7100 |
|
|
|
Total Amount (TK.) |
7100 |
7100 |
Narration:
To record Payment against the mobile bill for January 2025 as per the attached supporting.
Practical Example-21
Provision for Insurance Premium for the year 2025, dated 30.06,2025.
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Insurance Premium Group Term |
150000 |
|
|
|
150000 |
||
|
|
Total Amount (TK.) |
150000 |
150000 |
Narration:
To record Group Insurance premium, Total employees 100 persons, Basic Salary 17,06,700, Sum assured amount Tk. 4,09,60,800.
Practical Example-22
Payment for Insurance Premium for the year 2025, dated 30.06,2024.
Bank Payment Voucher
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
XYZ Islami Life Insurance Ltd.-S.C |
150000 |
|
|
ABC Islami Bank Ltd. SND- 5670 |
|
150000 |
|
|
|
Total Amount (TK.) |
150000 |
150000 |
Narration:
Paid Vide Chq No.**** dt. 15.10.25 Ref No.**** dt. 18.09.25for group term Insurance premium, Total employees 100 persons, Basic Salary ****, Sum assured amount Tk. *****
Practical Example-23
Provision for executive officers & staff salary & allowances for August 2025.
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Salary & Allowances Admin Department |
3,50,000 |
|
|
Salary & Allowances Production Department |
4,50,000 |
|
|
|
Salary & Allowances Quality Department |
1,50,000 |
|
|
|
Salary & Allowances Commercial Department |
2,50,000 |
|
|
|
Salary & Allowances Mechanical Department |
3,50,000 |
|
|
|
Salary & Allowances Store Department |
2,50,000 |
|
|
|
Salary & Allowances Electrical Department |
3,50,000 |
|
|
|
Salary & Allowances Labor Department |
1,50,000 |
|
|
|
Salary & Allowances Selling & Distribution Department |
3,50,000 |
|
|
|
Salary & Allowances Purchase Department |
2,50,000 |
|
|
|
Salary & Allowances Labor Department |
1,50,000 |
|
|
|
Salary & Allowances Admin Department |
3,50,000 |
|
|
|
|
Provision for Salary & Allowances |
|
34,00,000 |
|
|
Total Amount (TK.) |
34,00,000 |
34,00,000 |
Narration:
Provision for executive officers & staff salary & allowances for August 2025.
Practical Example-24
Payment against Provision for executive officers & staff salary & allowances for August 2025.
Bank Payment Voucher
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Salary & Allowances |
34,00,000 |
|
|
ABC Islamic Bank Ltd. SND- 5670 |
|
34,00,000 |
|
|
|
Total Amount (TK.) |
34,00,000 |
34,00,000 |
Narration:
To record Payment against Provision for executive officers & staff salary & allowances for August 2025.
Practical Example-25
Provision for Gratuity Expense for August 2025.
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Gratuity Expense (staff, officer, executive) |
3,50,000 |
|
|
Provision for Gratuity Expense |
|
3,50,000 |
|
|
|
Total Amount (TK.) |
3,50,000 |
3,50,000 |
Narration:
To record Provision for Gratuity Expense for August 2025.
Practical Example-26
Payment for Gratuity Expense for August 2025.
Bank Payment Voucher
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for Gratuity Expense |
3,50,000 |
|
|
ABC Bank LTD SND#5860 |
|
3,50,000 |
|
|
|
Total Amount (TK.) |
3,50,000 |
3,50,000 |
Narration:
To record Payment for Gratuity Expense for August 2025.
Practical Example-27
Provision for fees & charges for August 2025.
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Legal Expense |
200000 |
|
|
Provision for fees & charges |
|
200000 |
|
|
|
Total Amount (TK.) |
200000 |
200000 |
Narration:
To record Provision for fees & charges for August 2025.
Practical Example-28
Payment against Provision for fees & charges for August 2025.
Bank Payment Voucher
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for fees & charges |
2,00,000 |
|
|
Cash in Hand(H.O) |
|
2,00,000 |
|
|
|
Total Amount (TK.) |
2,00,000 |
2,00,000 |
Narration:
To record Payment against Provision for fees & charges for August 2025.
Practical Example-29
Provision for Quarterly interest on(EDF) bank loan for the month (January to March 2025).
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Interest on EDF Bank loan (NCC Bank) |
30,00,000 |
|
|
Provision for interest on bank loan |
|
30,00,000 |
|
|
|
Total Amount (TK.) |
30,00,000 |
30,00,000 |
Narration:
To record Provision for Quarterly interest on(EDF) bank loan for the month (January to March 2025).
Practical Example-30
Quarterly interest adjustment at the EDF bank loan for the month (January to March 2025).
Journal Voucher:
|
Date |
Ledger Name |
Debit (TK.) |
Credit (TK.) |
|
31.05.2025 |
Provision for interest on bank loan |
30,00,000 |
|
|
EDF-243-145560,RC-LC-10124(NCC Bank) |
|
10,00,000 |
|
|
EDF-243-145565,RC-LC-10124(NCC Bank) |
|
5,00,000 |
|
|
EDF-243-145561,RC-LC-10124(NCC Bank) |
|
10,00,000 |
|
|
EDF-243-145566,RC-LC-10124(NCC Bank) |
|
5,00,000 |
|
|
Total Amount (TK.) |
30,00,000 |
30,00,000 |
***RC-LC=Raw cotton LC
Narration:
To record the Quarterly interest adjustment at the EDF bank loan for the month (January to March 2025).
Practical Examples-31
A company sells products with a one-year warranty. Based on historical data, it estimates that warranty claims will cost about TK.5,000 for the year.
Provision for Warranty Expenses:
|
Date |
Ledger Head |
Debit (TK) |
Credit (TK) |
Remarks |
|
31.05 2023 |
Warranty Expense |
5,000 |
|
|
|
Provision for Warranty |
|
5,000 |
|
Narration: (To record Provision for Warranty Expenses).
Practical Examples-32
A company estimates that 2% of its accounts receivable will be uncontrollable. At the end of the period, the accounts receivable balance is TK200,000.Here ,(TK.200000@2%) =TK.4,000
Provision for Bad Debts:
|
Date |
Ledger Head |
Debit (TK) |
Credit (TK) |
Remarks |
|
16.08 2023 |
Bad Debt Expense |
4,000 |
|
|
|
|
4,000 |
|
Narration: (To record Provision for Doubtful Accounts).
Practical Examples-33
A company estimates its income tax liability for the year to be Tk.15,000, based on its taxable income.
Provision for Income Tax:
|
Date |
Ledger Head |
Debit (TK) |
Credit (TK) |
Remarks |
|
20.09 2023 |
Income Tax Expense |
15000 |
|
|
|
|
15000 |
|
Narration: (To record Provision for Income Tax)