All Courses
Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity Get the App Login Join for Free
Sign in Open App
Commerce Exam  >  Commerce Questions  >  Guarantees given in respect of third parties ... Start Learning for Free
SaveJoin the Discussion on the App
Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations?
Clear all your Commerce doubts with EduRev
Most Upvoted Answer
Guarantees given in respect of third parties will be considered as : A...
Guarantees given in respect of third parties are a type of financial obligation that a company may undertake. They are usually given to provide assurance to the third party that if the party fails to meet its obligations, the company will fulfill the obligation on its behalf. Such guarantees are considered as contingent liabilities.

Contingent Liabilities

A contingent liability is a potential liability that may arise from an uncertain event or condition. It is a liability that depends on the outcome of a future event that is beyond the control of the company. In the case of guarantees given in respect of third parties, the liability is contingent on the third party failing to meet its obligations.

Examples of Contingent Liabilities

- Legal claims against the company
- Guarantees given in respect of third parties
- Contingent purchase obligations
- Product warranties

Current Liabilities

A current liability is a financial obligation that a company expects to settle within the next twelve months. Examples of current liabilities include accounts payable, salaries payable, and taxes payable. Guarantees given in respect of third parties are not considered as current liabilities because they do not require payment within the next twelve months.

Contingent Assets

A contingent asset is a potential asset that may arise from an uncertain event or condition. It is a possible asset that depends on the outcome of a future event that is beyond the control of the company. Guarantees given in respect of third parties are not considered as contingent assets because they do not represent a potential asset for the company.

Provisions

A provision is a liability that is recognized when a company has a legal or constructive obligation to settle a liability that is uncertain in terms of timing or amount. Guarantees given in respect of third parties are not considered as provisions because they do not represent a legal or constructive obligation of the company.

Conclusion

Guarantees given in respect of third parties are considered as contingent liabilities because they represent a potential financial obligation that may arise from an uncertain event or condition. They are not considered as current liabilities, contingent assets, or provisions. Companies should disclose contingent liabilities in their financial statements to provide transparency to investors and stakeholders.
Community Answer
Guarantees given in respect of third parties will be considered as : A...
A
Attention Commerce Students!
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.
Explore Courses for Commerce exam

Similar Commerce Doubts

Read the following hypothetical Case Study and answer the given questions:The business which follows the convention of prudence keeps provisions and reserves so that they can keep the liquidity of the firm and help it in the time of crisis. But, what are exactly Reserves and Provisions. When we talk about provisions, they mean setting aside a part of the profits for meeting a known future liability, the amount of which is not accurately known at the time of finalization of financial statements. It is made for meeting known future liability. The amount of the liability cannot be determined accurately. It is charge against profit reducing the profit. Provisions serve a lot of purposes. It helps in ascertaining the true net profit of the entity. The true financial position can be determined adequately. It helps in providing funds for the liabilities that may occur in future. It helps in the proper allocation of expenses that are incurred over the time.Reserves, on the other hand, means an appropriation of profits or other surplus to strengthen the liquid resources of the business enterprise and not for meeting any liability, contingency or any commitment of the business. They are retained or undistributed net profit. It is voluntarily done to strengthen the financial position of the firm. It can be used for investing in outside securities. Like provisions, reserves are also very important for the business enterprises. It helps in meeting any unforeseen expenses. It strengthens the financial position of the firm. It helps in equal distribution of profit. It helps in providing funds to meet liability____________ means setting aside a part of the profits for meeting a known future liability.

Read the following hypothetical Case Study and answer the given questions:The business which follows the convention of prudence keeps provisions and reserves so that they can keep the liquidity of the firm and help it in the time of crisis. But, what are exactly Reserves and Provisions. When we talk about provisions, they mean setting aside a part of the profits for meeting a known future liability, the amount of which is not accurately known at the time of finalization of financial statements. It is made for meeting known future liability. The amount of the liability cannot be determined accurately. It is charge against profit reducing the profit. Provisions serve a lot of purposes. It helps in ascertaining the true net profit of the entity. The true financial position can be determined adequately. It helps in providing funds for the liabilities that may occur in future. It helps in the proper allocation of expenses that are incurred over the time.Reserves, on the other hand, means an appropriation of profits or other surplus to strengthen the liquid resources of the business enterprise and not for meeting any liability, contingency or any commitment of the business. They are retained or undistributed net profit. It is voluntarily done to strengthen the financial position of the firm. It can be used for investing in outside securities. Like provisions, reserves are also very important for the business enterprises. It helps in meeting any unforeseen expenses. It strengthens the financial position of the firm. It helps in equal distribution of profit. It helps in providing funds to meet liability____________ means an appropriation of profits or other surplus to strengthen the liquid resources of the business enterprise.

Top Courses for CommerceView all

Top Courses for Commerce

Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations?
Question Description
Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations?.
Solutions for Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? in English & in Hindi are available as part of our courses for Commerce. Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
Here you can find the meaning of Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? defined & explained in the simplest way possible. Besides giving the explanation of Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations?, a detailed solution for Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? has been provided alongside types of Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? theory, EduRev gives you an ample number of questions to practice Guarantees given in respect of third parties will be considered as : A. Contingent liability B. Current liability C. Contingent asset D. Provision Ans with explanations? tests, examples and also practice Commerce tests.
Explore Courses for Commerce exam

Top Courses for Commerce

Explore Courses

Suggested Free Tests

Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Get App
© EduRev
Education Revolution
Signup to see your scores go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup