What are Provision Elements?
Provisions are an expense element type that can be added to the Direct Costs, Overheads or Other Expense sections of the chart of accounts. They are used to model contingency expenses and liabilities in Castaway.
Provision expenses are non-cash expenses recorded on the P&L without impacting the cash balance. They give rise to a provision liability on the balance sheet that accrues and accumulates until written off. When the contingency or liability occurs, it is written off within the Provision element.
Provision Types
The Provision Type setting controls how the provision is classified and where it reports on the balance sheet.
| Provision Type | Use For |
|---|---|
| Doubtful Debt | General doubtful debts |
| Inventory Writedown | General inventory obsolescence |
| Staff | Staff liabilities such as provision for long service leave, annual leave, sick leave and other staff entitlements |
| Other | Any other provision type such as restructuring, legal settlements, warranties and similar |
Creating a Provision Element
- Go to Forecast > Element Settings.
- Select the appropriate expense section (Direct Costs, Overheads or Other Expense).
- Hover over the section to reveal the + icon and click it to open the element type menu.
- Select Provision from the menu.
- Enter a name for the element and press Enter to save.
Once created, click the element to open it and adjust the Provision Type and other element settings before entering data.
Modelling Example: Staff Leave Provision
This example demonstrates creating a staff leave provision using manual data entry, recognising $5,000 expense per month from July 2023 and writing off $13,000 in December 2023 to model an annual leave payment over the Christmas holiday period.
- Add a Provision element.
- Under Account Type, set the Provision Type to Staff.
- Under Provision Expense Method, select Enter Provision.
- Set the Write Off Method to Enter Write Off.
- Select the balance sheet reporting location from the Current/Non-Current Split setting.
- Enter $5,000 in the Enter Provision line for July 2023, then right-click and select Fill Right: Current Year from the action menu to populate the same value across the remaining periods in the current year.
- Enter $13,000 in the Enter Write Off line for December 2023.
- Review the P&L, Balance Sheet and Cash Flow Statement to confirm the figures appear as expected.
What this produces:
$5,000 is deducted from profit each month and the same amount accumulates in the provision liability account on the balance sheet. When the $13,000 annual leave payment is made, the accumulated provision liability is reduced by that amount, resulting in a balance of $17,000 in the balance sheet for December 2023 and a cash payment of $13,000 in the Cash Flow Statement.