What is difference between Accrual and Provision?

Question

Accepted Answer

Accrual is recognition of revenue/expenses when earned/incurred. Provision is an estimated expense/liability.

Accrual is based on actual transactions while provision is based on estimates.
Accrual is recognized when revenue is earned or expenses are incurred, regardless of payment.
Provision is recognized when there is a probable expense or liability, even if the amount is not yet known.
Examples of accrual include recognizing revenue for services provided but not yet invoiced, or recognizing expenses for goods received but not yet paid for.
Examples of provision include recognizing an estimated expense for a pending lawsuit or recognizing a liability for a potential warranty claim.

Accepted Answer

Accrual is an event of Accounting that is not happened yet instead we are treated as happened already. According to that we make entries.

While Provision is an uncertain future event that can  badly effect on statements, to prevent this Accountants make an entry that can be adjusted when the event will be come into affect.

What is difference between Accrual and Provision?

Top Infosys BPM Accountant interview questions & answers

Popular interview questions of Accountant

Top HR questions asked in Infosys BPM Accountant