Difference Between Write Off And Provision

Write Off VS Provision | Difference Between Bad Debts Write Off And Bad Debts Provision

Write Off means a percentage of amounts due is the certain or real amount and possibly may not be collected from the customers in reality at the end while a provision is an estimation of the amounts due which is uncertain or not sure to be collected from customers for sales.

Write off is recorded in the Income Statement as it is a Loss or an Expense to the business while a provision is a Current Liability which is created due to the probable or possible reduction in the value of an account. For example in case of an asset account (e.g., Accounts Receivable / Debtors), a Contra Asset Account (e.g., Allowance for Doubtful Accounts / Provision for Doubtful Debts) is deducted from relevant asset account (e.g., Accounts Receivable) on balance Sheet.

The best examples of write off are Write Off Bad Debts, inventory write off, etc.. while Provision for Doubtful Debts or Allowance for Doubtful Accounts, Provision for Inventory, etc., are the best examples of provision.