Which term describes money set aside for expected one-time expenses?

Which term describes money set aside for expected one-time expenses?

• A. Accrued Salaries
• B. Provisions
• C. Depreciation
• D. Accrued Taxes

Answer: (B)

Setting aside money for expected one-time expenses is about creating a provision. A provision is a liability recognized when there is a present obligation arising from a past event and it is probable that an outflow of resources will be required to settle it, with the amount can be estimated. This covers anticipated costs that are not certain in timing or exact amount but are likely, such as restructuring costs, warranties, or potential settlements. Provisions are set up specifically to cover these anticipated future outlays. This idea differs from accrued salaries, which are amounts owed to employees for work already performed and are part of routine operating expenses. Depreciation is not a cash reserve but an accounting method that gradually allocates the cost of a fixed asset over its useful life. Accrued taxes are a type of accrual for taxes owed but not yet paid, again tied to regular obligations rather than a designated fund for a future one-time event. Thus, the term that fits money reserved for expected one-time expenses is provisions.

Setting aside money for expected one-time expenses is about creating a provision. A provision is a liability recognized when there is a present obligation arising from a past event and it is probable that an outflow of resources will be required to settle it, with the amount can be estimated. This covers anticipated costs that are not certain in timing or exact amount but are likely, such as restructuring costs, warranties, or potential settlements. Provisions are set up specifically to cover these anticipated future outlays.

This idea differs from accrued salaries, which are amounts owed to employees for work already performed and are part of routine operating expenses. Depreciation is not a cash reserve but an accounting method that gradually allocates the cost of a fixed asset over its useful life. Accrued taxes are a type of accrual for taxes owed but not yet paid, again tied to regular obligations rather than a designated fund for a future one-time event. Thus, the term that fits money reserved for expected one-time expenses is provisions.