Question

Provision for Tax is:

• A. Current liabilities
• B. Internal reserve
• C. Both (A) and (B)
• D. None of these

Hint:

All provisions for expenses (like tax, doubtful debts, etc.) are liabilities and appear under Current Liabilities.

Answer 1

The Correct Option is A

Step 1: Nature of provision for tax.
Provision for tax represents the estimated amount payable to the government for the current accounting period.
Step 2: Balance sheet treatment.
It is shown under “Current liabilities” because it is payable within a short period (within one year).
Step 3: Eliminate wrong options.
- Option (B) Internal reserve: Wrong, because reserve is appropriation of profit, not liability.
- Option (C) Both: Wrong, it cannot be both.
- Option (D): Not correct since option (A) is right.
Step 4: Conclude.
Therefore, Provision for Tax is treated as a Current Liability.
Final Answer: \[ \boxed{\text{Current liabilities}} \]