what is relationship between depreciation and provision?

Depreciation and provision are both accounting concepts that involve setting aside funds for future expenses or losses.

Depreciation is the allocation of the cost of a tangible asset over its useful life. It is a non-cash expense that reduces the value of an asset on the balance sheet and reflects the wear and tear of the asset over time. Depreciation is used to match the cost of an asset with the revenue it generates over its useful life.

Provision, on the other hand, is the setting aside of funds to cover potential future expenses or losses that are uncertain in nature. Provisions are made to account for potential liabilities or losses that may occur in the future, but the exact amount or timing of which is uncertain.

The relationship between depreciation and provision is that both concepts involve setting aside funds for future expenses or losses. However, depreciation specifically relates to the allocation of the cost of tangible assets over their useful lives, while provisions are more general and can be made for a variety of potential future expenses or losses. Both depreciation and provisions are important for accurately reflecting the financial position of a company and ensuring that future expenses or losses are adequately accounted for.