Economics · Bank Accounts
The fundamental difference in the treatment of a Non-Performing Asset (NPA) provision and the provision for Income Tax in the Profit and Loss Account of a bank is:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Income Tax is a part of Operating Expenses, while NPA provision is deducted from advances on the asset side of the Balance Sheet.
- 2Both are charges on profit under Schedule 14 - Provisions and Contingencies, with NPA provision being based on classification guidelines and Income Tax on statutory rates.✓
- 3NPA provision is a charge on profit under Schedule 14 - Provisions and Contingencies, while Income Tax is an appropriation of profit.
- 4Both are treated as appropriations of profit and are deducted before arriving at the final profit figure.
Correct answer
Both are charges on profit under Schedule 14 - Provisions and Contingencies, with NPA provision being based on classification guidelines and Income Tax on statutory rates.
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