Should it happen that the amount of a specific expense incurred couldn’t be determined exactly at the end of a financial period, or financial year, provision is made for the expenses in the accounts.

This provision for future expenses works on the same principles as that of accrued or outstanding expenses.

The expense is recorded before the payment is made. It will decrease the profit for the financial year, but a liability will be created which will be paid in the next financial year.

To Identify and Calculate Provision for Outstanding Expenses:

Identify the Outstanding Expenses - For example, the pre-adjustment trial balance reflects no amounts for expenses for repairs on motor vehicles. On 26 February, the delivery van gives mechanical problems and is taken to the garage. It is estimated that the repairs to the delivery van will be approximately 2000. It will take approximately three weeks to repair the vehicle. .

- The expense of 2000 needs to be recorded to the Provision for Outstanding Expenses Account.

To Record Provision for Outstanding Expenses:

1. Click on the Batch Entry icon, or click on the Input→Batch Entry menu option.
   - Keyboard Access: Press the F2 key on your keyboard. Alternatively, you may press the Alt+I+B keys on your keyboard.
   The Batch Type Selection screen will be displayed.
2. Select the General Journal.
3. Click on the Open button. The Batch Entry Transaction screen for the General Journal will be displayed.
   - If the correct contra account is not displayed on the Batch Type Selection screen, or if you have not yet set the batch up; or if your requirements should change, click on the F10: Setup icon, or press the F10 key on your keyboard.
   - It is recommended that the Amount Entry field be set to allow both (debit and credit).
4. Enter the transaction in the batch. After entering the transactions in the general journal, the transactions are as follows:
   
   - Since no Tax is applicable to these transactions, you may select to hide the tax column, Exclusive and Inclusive icons, as well as the lookup facility in the Setup Options for the General Journal, as in this example.
   - It is not necessary to balance the batch, if you have entered debit transactions for the same amount as for credit transactions, the net total of all transactions (debits minus credits) and the reference total for the entire batch (journal) should be zero.
5. Click on the F9: Process icon, or press the F9 key on your keyboard, to change the alias.
   - This will help you if you wish to identify a specific batch to generate a batch type report, or if you wish to export posted batches to a file.
6. Click on the F8: List icon, or press the F8 key on your keyboard, to list the batch.
   - It is a good idea to list the batch, and check the entries on the batch thoroughly. If there are any errors, you may edit the batch before posting it.
7. Click on the F6: Post icon, or press the F6 key on your keyboard, to post (update) the batch to the ledger.

After posting the transactions the T-Account View of the transactions should reflect as follows:

1. Income Statement Accounts:
   
2. Balance Sheet Accounts:
   
   

The amount that should have been paid for the financial year is the amount on the pre-adjustment trial balance, if any, plus the amount of the provision for future expenses.

The expenses are increased (debited) and current liabilities are increased (credited).

- Debits - Expenses = Credits - Liabilities

— digidan 2006/11/03 06:57