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Provision amount is calculated by applying rateasper tax rules on profit before tax figure.Profitbefore tax is usually a gross profit lessoperating,financial and other expenses plus otherincome.
Also know, is provision for income taxes an expense?
The recording of the liability in the entity'sbalancesheet is matched to an appropriate expense account intheentity's income statement. In U.S. GAAP, aprovisionis an expense. Thus, "Provision forIncome Taxes" isan expense in U.S. GAAP but a liabilityinIFRS.
Moreover, how do I get provision for income tax?
Add net income to provisions tocalculatethe pre-tax income. Thus, if your net incomewas$100,000, and your income tax expense for the yearwas$32,000, then your pre-tax income is $132,000. Dividethecompany's provisions by its pre-tax income toderivethe effective tax rate.
A provision is the amount of an expense thatanentity elects to recognize now, before it has preciseinformationabout the exact amount of the expense. Forexample, anentity routinely records provisions forbad debts, salesallowances, and inventoryobsolescence.