If provision for taxation is treated as a current liability, then payment of tax is

The correct answer is: A. an application of funds.

A provision for taxation is a liability that is recognized in the current period for the estimated amount of tax that will be payable in future periods. When the tax is paid, the liability is settled and the cash account is reduced. This is an application of funds, as the company is using its cash to settle a liability.

Option B is incorrect because a source of funds is an inflow of cash, such as from the sale of goods or services. Option C is incorrect because a flow of funds is any movement of cash into or out of a company. Option D is incorrect because the payment of tax is a flow of funds.