Here are the reasons why the provision is vital for companies – ● Provision is an amount preserved from the company's profits to meet the losses in the future during the accounting period. ● Provinces are created on the guidelines of the Prudence Concept of Accounting. Therefore, provisions help the companies retain a part of their current income, which will put the firm in a better position. ● Provision safeguards the business capital as any loss in a company's assets does not affect the main capital of the business.