An association has the obligation to comply or can estimate that it can be, from that moment we are talking about provision, the importance, their types, objective and how they work can be detailed through this article.
The different expenses in the companies are covered with the provision
What is provision?
Each one of the companies or organizations must have pending having the necessary reserves to be able to comply with the possible depreciations in the cost of the assets as well as for the obligations that are planned and projected for the following days, it is what refers to the term provision.
To be able to account for a provision, for example, when registering a credit in the account for 1499 compared to a debit in the account 5299; in the case of an eventuality it has consequence, the cost of the provisioned asset must be subtracted, otherwise it has no consequence, it is feasible to make a provision reserve.
In the event that the firm has a future commitment or plans to acquire a commitment, it must provision, this means that it must provide supplies; where a series of assets of the company is considered to meet current and future obligations. These supplies when the fiscal year ends, in most cases by December 31.
The preservation of a part of the salary, where each company and organization that guide their employees must carry out, to provide security and guarantee that the expenses generated by the taxes will be met, making provision of resources.
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Types of provision
The provisions can be classified into different types in this case of expense in which it is provisioned and the time it will last. According to the type of expense that the provision is made:
When the provision is contracted but has not been canceled, it happens in a past obligation; For example, when merchandise is purchased from a vendor and a payment agreement is made for 6 months, by December 31, the end of the fiscal year, a provision must be made for the outstanding debt.
Provision of an obligation not contracted, not paid but foreseeable, is a future need; For example, by December 31, it is understood that a specific lien must be paid for the month of February of the following year; Without knowing the exact amount, an amount above the stipulated amount must be provided in order to face the payment.
Provision for impairment expenses; however, the deterioration is not an obligation of the cat for the company, in the event that deterioration is suspected or evidenced, from one client or another, a replacement must be granted.
According to the estimated duration of the provision
In the short term: when it is expected that the duty that is being supplied will be carried out in the short term, this means, in a period of less than 12 months; this provision will be included in current liabilities.
Long-term: when it is expected that the duty that is being provisioned will be consummated in the long term, this means, in a period greater than 12 months; this provision will be included in non-current liabilities.
Objective
The objective of the provision is to protect a commitment or an expense that will have to be faced in the future; Frequently, these needs or expenses are forecasts and therefore, there is no total clarity of what will originate. In the event that the supply does not occur, it must be reversed and, therefore, the situation before the supply is returned, this would represent the fact of not having made any provision.
How It Works
In order to find the respective calculations, you can refer to each of the steps for the necessary calculations of future payments. In the case of layoffs, the employer must pay an annual salary, including transportation assistance, to the employee for the layoffs, therefore, if this worker has a salary of 800.000 + 80.000 for transportation.
The owner must pay 880.000 for each year that he worked, bearing in mind that the days that there have been unjustified absences from work and other situations that justify the discount are discounted or subtracted. To calculate the provisions, it lies in separating all the sums of each month, where 8,33% per month of the total received must be provisioned, for this the salary elements must be taken into account, that is, multiply 8,33% x 12 = 100%.
Holiday Courses
For the calculation of vacations, in almost all cases, 4,17% per month corresponds, that is, half of the annual salary; The employee is paid at the same time he goes out to enjoy those holidays, leaving around 15 working days paid for each year. In these calculations, the aid given for transportation is not taken into account, to calculate the settlement, the year of entry of the worker within the company must be taken into account.
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As far as the service premium is concerned, the computations are handled almost similarly to layoffs, only that it must be paid on a semi-annual basis, this means that payments are made twice a year.
For example, a full salary is paid to the employee, one half is to pay on June 20 and the other half for December 20 of the same year; If he resigns or is fired, he will receive what was originated or produced during that time in office.
Importance
The importance of the provisions does not have to do only with safeguarding the funds for the near future, but also to show the conditions of the lucrative financial statements for the clients who take the measures from that moment.
Generally, in the language of the industry, certain provisions are evoked that do not conform to the notion referred to by supply, which form agreements for other assets, such as the provision of accounts receivable in which losses are recorded. for impairment, or reserve of commitments with a low level of fluctuation, as is the case of the liability for compensation for economic activity.
In order to evidence the presence of the provision, it must be taken into account if the company acquired any obligation with others or by legal or regulatory agreements it must face an obligation; being in this way a high possibility of compliance and for which the terms that dictate the time and cost of the expense are not available, but there is all the viable documentation to execute the computations and valuations.