Distinguish between liability and provision.

Difference between Liability and Provision Points Liability Provision Meaning Expenses or amounts which are payable on the expiry of certain period as agreed between business parties are known as liability. A Provision is a charge against profit i.e. it is debited to profit and loss account. Type of account Liabilities are personal accounts. Provisions are nominal accounts Treatment Liabilities are shown on the liability side of the balance sheet. As per schedule III of the Companies Act, 2013, long term provisions are shown under the heading 'Non-current liabilities' while short term provisions are shown under the heading 'Current Liabilities'