Provisions and Reserves - Audit of Depreciation, Auditing and Secretarial Practice Video Lecture | Auditing and Secretarial Practice - B Com

dear friends today we are going to talk
about provisions and reserves have you
heard about these terms
well actually this isn't anything new we
can relate it to how our mother manages
all the household expenses let's say the
monthly income is thirty thousand how
will she utilize this amount how much
will she spend and how much will she
save first
she will set aside some money for all of
the fixed monthly expenses like grocery
the house bills laundry and the
children's school fees even though the
prices of the groceries she buys or
bills she pays may vary a little but
relatively they would be in the same
range so say the rough estimate of all
these expenses is twenty thousand she
has to first keep this money aside
regardless of the variation in the
income this money should be handy and so
it is advisable to not lock in or invest
this amount anywhere for long term and
what about the remaining ten thousand
how will she utilize it she would save
this for unforeseen circumstances or
unexpected expenses like medical
expenses or even start saving for
something big like buying a new house
and save some for any emergency or any
other purpose as these are unexpected
the amount required for such expense is
not known these are usually kept aside
depending on priority and the current
income so it's not always necessary that
the entire amount would be spend so
rather part can be invested for a longer
period so in this manner usually our mom
manages all regular expenses as well as
save some amount from the income is she
not a great accountant
we salute moms all over the world
by observing how she manages the family
budget we can definitely learn something
important from her similarly even
businesses how to manage their budget
their expenses and savings they to have
some expected and unexpected expenses or
losses right can you name some of them
yes like tax depreciation and some
expenses like bad debt which is certain
or employ a retirement fund like
gratuity mile in future there can be any
incidences or accidents some product may
go outdated unexpected tax claim or the
company may want to expand its office so
the amount which is provided for
expected and certain future expenses and
losses are known as provisions while the
amount which is preserved for the
unexpected or any uncertain events are
known as reserves I hope you liked our
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