What are provisions?

The provisions of a company are made up of the resources that form it and that have been acquired through an obligation. Thus, the definition of provisions is the capacity that companies have to save and store their resources from the accounts of the passive. In addition, these resources will be stored until the moment in which a company needs to face the payment of a bill.

As well as characteristics of the provisions, companies may resort to them when they have contracted some type of obligation and must face it through own funds.

Types of provisions

On the other hand, there are several types of provisions that are classified according to the risks and expenses to which they have to be subjected.

  • Financial provisions
  • Extraordinary provisions
  • Operating provisions

In any case, since the future may be uncertain, there is also a distinction between long-term provisions and short-term provisions. With this classification, the company will be able to know in advance what it will be able to face or what not to guarantee its own benefits.

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