The correct answer is C. Provision.
A provision is a liability that is not recognized as a liability because it is not certain that a future outflow of resources will be required to settle the obligation. A provision is recognized when an entity has a present obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and the amount of the obligation can be reliably estimated.
In the case of bad debts, a provision is recognized when it is probable that a customer will not pay their debt. The amount of the provision is estimated based on the entity’s historical experience of bad debts.
A liability is a present obligation of an entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
A reserve is a fund that is set aside for a specific purpose, such as to meet future expenses or to provide for contingencies. Reserves are not liabilities, because they are not obligations to pay out resources.
A contingent liability is a potential liability that arises from an existing situation, but is not recognized as a liability because it is not probable that an outflow of resources will be required to settle the obligation, or the amount of the obligation cannot be reliably estimated.