Which term describes money kept aside to cover irregular or anticipated costs?

Which term describes money kept aside to cover irregular or anticipated costs?

• A. Provisions
• B. Accrued Taxes
• C. Cash on Hand
• D. Retained Profit

Answer: (A)

Provisions are funds set aside to cover costs that are likely to occur but whose exact amount or timing is uncertain. In accounting, a provision is a liability recognized when there is a present obligation from a past event and it’s probable that an outflow of resources will be needed, with a reliable estimate available. This fits the idea of money kept aside for irregular or anticipated costs, such as warranties, legal claims, or restructuring costs. Accrued taxes are amounts owed for taxes based on current periods; they’re about tax obligations rather than earmarked future costs. Cash on hand is simply immediate cash available, not reserved for future losses. Retained profit represents accumulated earnings kept in the business as equity, not funds set aside to cover specific future expenses.

Provisions are funds set aside to cover costs that are likely to occur but whose exact amount or timing is uncertain. In accounting, a provision is a liability recognized when there is a present obligation from a past event and it’s probable that an outflow of resources will be needed, with a reliable estimate available. This fits the idea of money kept aside for irregular or anticipated costs, such as warranties, legal claims, or restructuring costs.

Accrued taxes are amounts owed for taxes based on current periods; they’re about tax obligations rather than earmarked future costs. Cash on hand is simply immediate cash available, not reserved for future losses. Retained profit represents accumulated earnings kept in the business as equity, not funds set aside to cover specific future expenses.