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Which of the following is not a contingent liability?
- a)Claims against the firm not acknowledged as debts.
- b)Guarantees given in respect of third parties.
- c)Amount due to trade creditors which is not disputed.
- d)Bills discounted form bank.
Correct answer is option 'C'. Can you explain this answer?
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Which of the following is not a contingent liability?a)Claims against ...
Contingent liabilities are potential liabilities that may arise in the future, depending on the outcome of a particular event. These liabilities are not certain and depend on certain conditions being fulfilled. Let's understand the given options and why option C is not a contingent liability.
Claims against the firm not acknowledged as debts
These are claims made by a third party against the firm, but the firm has not accepted them as debts. These claims may arise due to various reasons, such as disputes with suppliers or customers. Since the firm has not accepted these claims as debts, they are considered as contingent liabilities.
Guarantees given in respect of third parties
When a firm provides a guarantee to a third party, it is agreeing to fulfill the obligation of that third party in case of default. This creates a potential liability for the firm, which may or may not arise in the future. Hence, guarantees given in respect of third parties are considered as contingent liabilities.
Amount due to trade creditors which is not disputed
This option refers to the amount owed by the firm to its trade creditors, which is not disputed. In other words, the firm has accepted the liability of paying this amount. Since this liability is certain and not dependent on any condition, it cannot be considered as a contingent liability.
Bills discounted from bank
When a firm discounts its bills with a bank, it receives immediate cash but agrees to repay the bank at a future date. This creates a potential liability for the firm, which may or may not arise in the future. Hence, bills discounted from a bank are considered as contingent liabilities.
Conclusion
In conclusion, option C is not a contingent liability because it is a certain liability that the firm has accepted. Contingent liabilities are potential liabilities that may or may not arise in the future, depending on certain conditions.
Claims against the firm not acknowledged as debts
These are claims made by a third party against the firm, but the firm has not accepted them as debts. These claims may arise due to various reasons, such as disputes with suppliers or customers. Since the firm has not accepted these claims as debts, they are considered as contingent liabilities.
Guarantees given in respect of third parties
When a firm provides a guarantee to a third party, it is agreeing to fulfill the obligation of that third party in case of default. This creates a potential liability for the firm, which may or may not arise in the future. Hence, guarantees given in respect of third parties are considered as contingent liabilities.
Amount due to trade creditors which is not disputed
This option refers to the amount owed by the firm to its trade creditors, which is not disputed. In other words, the firm has accepted the liability of paying this amount. Since this liability is certain and not dependent on any condition, it cannot be considered as a contingent liability.
Bills discounted from bank
When a firm discounts its bills with a bank, it receives immediate cash but agrees to repay the bank at a future date. This creates a potential liability for the firm, which may or may not arise in the future. Hence, bills discounted from a bank are considered as contingent liabilities.
Conclusion
In conclusion, option C is not a contingent liability because it is a certain liability that the firm has accepted. Contingent liabilities are potential liabilities that may or may not arise in the future, depending on certain conditions.
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Which of the following is not a contingent liability?a)Claims against ...
Contingent liabilities are liabilities which may or may not arise depending upon the happening of a certain event. Since the amount due to trade creditors has to be paid because it is not disputed, it is not a contingent liability.
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Which of the following is not a contingent liability?a)Claims against the firm not acknowledged as debts.b)Guarantees given in respect of third parties.c)Amount due to trade creditors which is not disputed.d)Bills discounted form bank.Correct answer is option 'C'. Can you explain this answer?
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