Accrual or provision

Provisions are a technical term from the preparation of annual financial statements, or the balance sheet. The special feature of a provision is that it is safely assumed that these liabilities will be collected. But the exact amount and the time of maturity are still unknown.

Provisions must always be made when these conditions are met:

The liability to be provided for has arisen in the past business year.
They may not be formed if there is only a certain risk.
The company making the provision is obliged to estimate the amount of the provision in good faith.

In the balance sheet, provisions are a negative asset that reduces profit. After all, they are expenses for the hotel.


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