​If the amount of any known liability cannot be determined accurately, then :​

Correct option is A

The correct answer is (a) Provision should be created

Explanation:
• When a liability is known but cannot be measured exactly, an estimated amount is recorded as a provision.
• It ensures that expenses and liabilities are not understated in financial statements.
• Example: Provision for doubtful debts, provision for taxation, or provision for warranty.
• This follows the Conservatism (Prudence) Principle — recognize possible losses, not unrealized gains.

Information Booster:
• Provision = a charge against profit; created for known liabilities of uncertain amount.
• Reserves = appropriation of profit; created for strengthening the financial position.
• Provision appears on the liabilities side of the Balance Sheet.
• It helps present a true and fair view of financial position.
• Governed by AS-29 (Provisions, Contingent Liabilities and Contingent Assets).

Additional Knowledge:
• Provision should not be created only when liability is neither probable nor estimable.
• Reserve is not meant for any specific liability; it is created from profits for future use.
• Examples of Reserves: General Reserve, Capital Reserve, Dividend Equalization Reserve.
• Provisions reduce current year’s profits, while reserves allocate profits after determination.