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In the case of _______, either outflow of resources to settle the obligation is not probable or the amount expected to be paid to settle the liability cannot be measured with sufficient reliability.
- a)Liability.
- b)Provision.
- c)Contingent liabilities.
- d)Contingent assets.
Correct answer is option 'C'. Can you explain this answer?
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In the case of _______, either outflow of resources to settle the obli...
Contingent liabilities
Contingent liabilities are potential obligations that may arise in the future, depending on the occurrence or non-occurrence of one or more uncertain future events. These liabilities are not recognized in the financial statements, but they are disclosed in the notes to the financial statements.
Definition
Contingent liabilities are defined as liabilities that either:
1. Outflow of resources is not probable to settle the obligation: This means that it is not likely that the company will have to pay the liability in the future.
2. The amount expected to be paid to settle the liability cannot be measured with sufficient reliability: This means that it is not possible to estimate the amount of liability with reasonable accuracy.
Recognition
Contingent liabilities are not recognized in the financial statements because they are not certain or cannot be measured reliably. However, they are disclosed in the notes to the financial statements to provide information to the users of financial statements about the potential obligations that may arise in the future.
Examples
Examples of contingent liabilities include:
1. Lawsuits and legal claims against the company
2. Guarantees and warranties provided by the company
3. Environmental liabilities
4. Tax disputes
5. Potential losses from investments in other companies
Conclusion
Contingent liabilities are potential obligations that may arise in the future, depending on the occurrence or non-occurrence of uncertain future events. They are not recognized in the financial statements, but they are disclosed in the notes to the financial statements to provide information to the users of financial statements.
Contingent liabilities are potential obligations that may arise in the future, depending on the occurrence or non-occurrence of one or more uncertain future events. These liabilities are not recognized in the financial statements, but they are disclosed in the notes to the financial statements.
Definition
Contingent liabilities are defined as liabilities that either:
1. Outflow of resources is not probable to settle the obligation: This means that it is not likely that the company will have to pay the liability in the future.
2. The amount expected to be paid to settle the liability cannot be measured with sufficient reliability: This means that it is not possible to estimate the amount of liability with reasonable accuracy.
Recognition
Contingent liabilities are not recognized in the financial statements because they are not certain or cannot be measured reliably. However, they are disclosed in the notes to the financial statements to provide information to the users of financial statements about the potential obligations that may arise in the future.
Examples
Examples of contingent liabilities include:
1. Lawsuits and legal claims against the company
2. Guarantees and warranties provided by the company
3. Environmental liabilities
4. Tax disputes
5. Potential losses from investments in other companies
Conclusion
Contingent liabilities are potential obligations that may arise in the future, depending on the occurrence or non-occurrence of uncertain future events. They are not recognized in the financial statements, but they are disclosed in the notes to the financial statements to provide information to the users of financial statements.
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In the case of _______, either outflow of resources to settle the obli...
It may arise in future depending on occurrence/ non occurrence of one or more uncertain future events
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In the case of _______, either outflow of resources to settle the obligation is not probable or the amount expected to be paid to settle the liability cannot be measured with sufficient reliability.a)Liability.b)Provision.c)Contingent liabilities.d)Contingent assets.Correct answer is option 'C'. Can you explain this answer?
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