Answer : Difference between net charge off Vs Provision for loan
loss are :
- Net charge off is the difference between the gross charge off
and recoveries . It is debt that is unable to recovered by the
company . Where as Provision for loan loss means an expense that
has been set aside in order to recover the loan losses in the
future time period.
- Example of net charge off is that if any company has written
off bad debt than it is known as gross charge off when some
recoveries has been received than it is deducted from gross and we
received net charge off.Examples of provision for loan losses are
recovered of bad loan , customer default etc.
Purpose of loan loss provision account are :
- It is an adjustment to loan loss reserve account.
- These provision are created to recover number of factors
associated with potential loan losses.
- Bad loans, Customer default in paying money, renegotiated loan
amount.
- These provision are created to overcome uncertain expenses or
losses in a particular time period.