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5. What is the relationship between the provision for loan losses on a bank's Report of Income and the allowance for loan losses on its Report of Condition? XXXXXXXXXX Gross loans equal the total of all loans currently outstanding that are recorded on the bank's books. The allowance for loan losses is built up gradually over time by an annual noncash expense item that is charged against the bank's current income, known as the Provision for Loan Losses. The dollar amount of the annual loan-loss provision plus the amount of recovered funds from any loans previously declared worthless (charged off) less any loans charged off as worthless in the current period is added to the allowance-for-loan-losses account. If current charge-offs of worthless loans exceed the annual loan-loss provision plus any recoveries on previously charged-off loans the annual net figure becomes negative and is subtracted from the allowance-for-loan-losses account. Gross loans equal the total of all loans currently outstanding that are recorded on the bank's books. Net loans are equal to gross oans less any interest income on loans already collected by the sank but not yet earned and also less the allowance for loan-loss iccount (or bad-debt reserve). The allowance for loan losses is puilt up gradually over time by an annual noncash expense item hat is charged against the bank's current income, known as the Provision for Loan Losses. The dollar amount of the annual oan-loss provision plus the amount of recovered funds from any oans previously declared worthless (charged off) less any loans charged off as worthless in the current period is added to the allowance-for-loan-losses account. If current charge-offs of Northless loans exceed the annual loan-loss provision plus any 'ecoveries on previously charged-off loans the annual net figure becomes negative and is subtracted from the allowance-for-loanosses account