Provision

Intermediate 💰 Finance / Accounting

Definition

Money set aside for a future obligation you're pretty sure will happen—basically an educated guess with teeth.

Example Usage

We booked a provision for legal settlements in the amount of $2M.

Origin

From Latin 'providere,' meaning 'to foresee'

Fun Fact

Provisions are essentially bets against bad outcomes that accounting standards force you to make

Source: GAAP accounting standards

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