Accounting Process-Books of Accounts - Contingent Assets and Liabilities [CA (Chartered Accountant) Foundation Principles of Accounting]: Questions 1 - 3 of 5

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Question 1

Question MCQ▾

Which of these statement (s) are correct about contingent assets?

Choices

Choice (4)Response

a.

The term contingent is used when the outcome of a condition is uncertain

b.

A legal case of compensation whose judgment will be declared after the balance sheet date is an example

c.

When the term contingent is used as a prefix to asset it means the asset is a possible asset to the enterprise

d.

All a., b. and c. are correct

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Question 2

Question MCQ▾

Differentiate between a liability and a contingent liability?

Choices

Choice (4)Response

a.

Liability is a present obligation arising from past events of an enterprise Whereas a Contingent liability is an obligation whcih may or may not arise

b.

In Liability, there is certainty in the amount of outflow from the enterprises Whereas in Contingent liability there is no certainty on the amount of outflow from the enterprise

c.

Disclosures are shown in Liability Whereas Disclosures are not shown in a Contingent liability

d.

Both a. and b. are correct

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Question 3

Question MCQ▾

Which one of these is not a difference between Provision and Contingent liability?

Choices

Choice (4)Response

a.

Provision is a present liability of an uncertain amount Whereas Contingent liability is a possible obligation

b.

Provision doesn՚t meet the recognition criteria Whereas Contingent liability does meet the recognition criteria

c.

Disclosure is shown as a liability in the balance sheet Whereas Contingent liability is not shown at all

d.

All a., b. and c. are correct

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