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AS 25
Accountancy
3. How is the answer 17000 4. Provision for 2nd quarter should be 1.5 million right, total provision both 1st & 2nd quarter is only 2 million?
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The answer is 2 million only. In first quarter we create a provision of 5% on sales and from the second quarter onwards we will create a provision of 10% on sales. The total provision that we create in second year will include the first quarter provision created and the second quarter provision. So, the total will be 2 million
The 10% should be applied on sales of the entire year upto then. It clearly says "warranty claims.....10%.....for the whole year" Then, we should consider the fact that there is already an 'old' provision, made in the first quarter. We need to find the additional provision to be made here. Similar to how we handled the bad debts adjustments in foundation
