In page navigation


Updated: Aug 20, 2021

An accounting term originally defined in the Companies Act 1948 as ‘any amount written off or retained by way of providing for depreciation, renewals, or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy’. If the amount is more than the directors consider strictly necessary, the difference should be treated as a reserve and not as a provision. The 1981 Companies Act provided that in the accounts of limited company’s notes must be supplied showing the amount of every material provision for liabilities or charges and distinguishing between the figure at the commencement of the period to which those accounts relate and the closing figure. Details of transfers to and from those provisions must also be given.

Reference: The Penguin Business Dictionary , 3rd edt.

Sources & references
Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.