Question about provisions and deferred expense/income

[Myrrhman]

Do people mean the same thing when they say expense provision or deferred expense (or income)?

A deferred expense could be a service I know I'm getting in a couple of months, the registry of it could be Dr on Deferred Expense, and Cr on Bank.

Now, I've seen "tax provisions" that, in my opinion, look exactly the same as deferred expenses to me, what's the difference? Do I have the wrong concept of what a provision is? I'll give an example, and you tell me whether I'm right or wrong.

A) Setting up a tax provision of 100. Let's say you're supposed to pay it monthly over the course of a year.

Tax provision (dr) 100
Account Payable (cr) 100

B) Payment of a month.

Tax Expense (dr) 8.33
Tax Provision (cr) 8.33

Account Payable (dr) 8.33
Bank (cr) 8.33

I feel very confused by provisions, and the way I see it, they got the same spirit as deferred expenses (or income). Also, I only keep mentioning "income provision" because my boss used to mention the term a lot when talking about registering income invoiced in advance, but I've been analyzing the situation and I think she meant Deferred Income the whole time.

Can someone tell me the proper way of registering a tax provision, and a regular expense provision, and how to eventually "kill" it off? I think I might have the wrong concept about Provisions, aren't Provisions what companies register when they know they're getting an expense, but they're not sure about the amount?

 

[Myrrhman]

Also, as an extra question, let's say that you're on January, and what you want to provision an expense from July, but you're not sure about the specific amount, and you think it will be 10k. How would you register this on January, and on July when you actually get the specific amount of 11k, and pay it off on July? The way I THINK it is would be:

A) Setting up provision on January
Expense Provision 10k
Account Payable 10k

B) Recognizing the specific amount in July, and paying it off
Expense 11k
Account Payalbe 10k
Expense Provision 10k
Bank 11k

Am I right? This is something I wouldn't be able to analyze in my head, I'd really appreciate any recommendation on exercises, Provisions is something I haven't seen much at my University or at real life work.

 

[Fidget]

I feel very confused by provisions, and the way I see it, they got the same spirit as deferred expenses (or income). Also, I only keep mentioning "income provision" because my boss used to mention the term a lot when talking about registering income invoiced in advance, but I've been analyzing the situation and I think she meant Deferred Income the whole time.

Can someone tell me the proper way of registering a tax provision, and a regular expense provision, and how to eventually "kill" it off? I think I might have the wrong concept about Provisions, aren't Provisions what companies register when they know they're getting an expense, but they're not sure about the amount?

The difference between a provision and a deferred expense is that with a provision, you're basically saving up for something to be paid at a later date, so it's a liability on the balance sheet. A deferred expense has already been paid, but won't go through the I&E until a later date, so in essence a deferred expense is a prepayment, and is an asset on the balance sheet.