Hi, I was confused about the impact of adding provision to the balance sheet. I read in the CFA vol 4 pp 160. It says that provision is a liability. But for example u want to book a provision, Income Statement: book provision as expense. Asset side: what to do? Liability: add provision. Equity: reduce Retained earning as expense has been added to the Income statement, thus less earning this yr. Anybody can help?
I think you answered your own dilemma.
? didnt get it. If we want to book 100 as provision. Income: less 100 (1-tax) Asset: ?? Liability: add 100 Equity: less 100(1-tax)