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Contingent asset usually arises from unplanned or unexpected events that give rise to
- a)The possibility of an inflow of economic benefits to the business entity.
- b)The possibility of an outflow of economic benefits to the business entity.
- c)Either (a) or (b)
- d)None of the above.
Correct answer is option 'A'. Can you explain this answer?
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Contingent asset usually arises from unplanned or unexpected events th...
Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the enterprise. An example is a claim that an enterprise is pursuing through legal processes, where the outcome is uncertain.
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Contingent asset usually arises from unplanned or unexpected events th...
Contingent asset usually arises from unplanned or unexpected events that give rise to:
1. Possibility of an inflow of economic benefits to the business entity:
A contingent asset is a potential asset that may arise in the future, depending on the occurrence of certain events. It is not certain whether the asset will materialize or not. However, if the event does occur, it has the potential to bring economic benefits to the business entity. For example, a company may have filed a lawsuit against another party, and if the company wins the case, it may receive a settlement or damages which will result in an inflow of economic benefits.
2. Possibility of an outflow of economic benefits to the business entity:
A contingent asset can also arise from events that may lead to an outflow of economic benefits. For example, a company may have provided a guarantee for a loan taken by another party. If the borrower defaults on the loan, the company may have to fulfill its obligation and make payments on behalf of the borrower. This would result in an outflow of economic benefits from the entity.
3. Either (a) or (b):
The correct answer is (a) because a contingent asset primarily arises from the possibility of an inflow of economic benefits to the business entity. While there are cases where a contingent asset may arise from the possibility of an outflow of economic benefits, it is not the primary characteristic of a contingent asset.
4. None of the above:
The answer is not (d) because a contingent asset does arise from either the possibility of an inflow or outflow of economic benefits. However, the primary characteristic of a contingent asset is the possibility of an inflow of economic benefits, making option (a) the correct answer.
In conclusion, a contingent asset usually arises from unplanned or unexpected events that have the potential to bring economic benefits to the business entity. While there can be cases where a contingent asset arises from the possibility of an outflow of economic benefits, the primary characteristic is the possibility of an inflow of economic benefits.
1. Possibility of an inflow of economic benefits to the business entity:
A contingent asset is a potential asset that may arise in the future, depending on the occurrence of certain events. It is not certain whether the asset will materialize or not. However, if the event does occur, it has the potential to bring economic benefits to the business entity. For example, a company may have filed a lawsuit against another party, and if the company wins the case, it may receive a settlement or damages which will result in an inflow of economic benefits.
2. Possibility of an outflow of economic benefits to the business entity:
A contingent asset can also arise from events that may lead to an outflow of economic benefits. For example, a company may have provided a guarantee for a loan taken by another party. If the borrower defaults on the loan, the company may have to fulfill its obligation and make payments on behalf of the borrower. This would result in an outflow of economic benefits from the entity.
3. Either (a) or (b):
The correct answer is (a) because a contingent asset primarily arises from the possibility of an inflow of economic benefits to the business entity. While there are cases where a contingent asset may arise from the possibility of an outflow of economic benefits, it is not the primary characteristic of a contingent asset.
4. None of the above:
The answer is not (d) because a contingent asset does arise from either the possibility of an inflow or outflow of economic benefits. However, the primary characteristic of a contingent asset is the possibility of an inflow of economic benefits, making option (a) the correct answer.
In conclusion, a contingent asset usually arises from unplanned or unexpected events that have the potential to bring economic benefits to the business entity. While there can be cases where a contingent asset arises from the possibility of an outflow of economic benefits, the primary characteristic is the possibility of an inflow of economic benefits.
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Contingent asset usually arises from unplanned or unexpected events that give rise toa)The possibility of an inflow of economic benefits to the business entity.b)The possibility of an outflow of economic benefits to the business entity.c)Either (a) or (b)d)None of the above.Correct answer is option 'A'. Can you explain this answer?
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