Difference between General Provision and Specific provision

Difference between General Provision and Specific provision

Provision is an amount which is charged to current income statement as expenses and appear in balance sheet as liability and any future loss is settled against this liability. Therefore provision is basically creation of a liability which is to be settled against future loss.

General Provision

General provision is amount which is set a side by the entity to cover the future loses.General provision is suitable option for high risk business.

Specific provision

Specific provision are kept against the specific expected loss which can be reliably measured at the date of provision. Example of specific provision include provision for bad debt and provision for against a dispute.

Example of Provision

ABC company has a dispute with on copy right and legal expert see little chance of wining the case in court of law. Legal expert estimated a 200,000 then ABC is required to create a provision of $ 200,000.


Income Statement              $ 200,000 (Dr)
Provision for Fine              $ 200,000 (Cr)