18.8 - Provisions vs Reserves
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Practice Questions
Test your understanding with targeted questions
What is a provision?
💡 Hint: Think of it as preparation for future costs.
Do reserves affect net profit?
💡 Hint: Consider the difference between expenses and appropriations.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is a provision?
💡 Hint: Think about preparation for expenses.
Are reserves mandatory in accounting?
💡 Hint: Consider whether companies must legally set aside these funds.
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Challenge Problems
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A company has a net income of $150,000. If it decides to set aside $30,000 for potential warranty claims, what will be the new net income?
💡 Hint: Subtract the provision amount from net income.
Discuss a scenario where failing to set a provision could lead to financial misrepresentation.
💡 Hint: Consider regulations and the impact on stakeholder confidence.
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