CA Intermediate Exam > CA Intermediate Videos > Advanced Accounting for CA Intermediate > Provisions & Contingent Liabilities
Provisions & Contingent Liabilities Video Lecture | Advanced Accounting for CA Intermediate
FAQs on Provisions & Contingent Liabilities Video Lecture - Advanced Accounting for CA Intermediate
| 1. What are provisions in accounting and how are they different from contingent liabilities? |  |
Ans. Provisions in accounting refer to estimated liabilities that are recorded in a company's financial statements. They are recognized based on a past event and are probable to result in an outflow of resources. Contingent liabilities, on the other hand, are potential liabilities that may arise from uncertain future events. They are not recognized in the financial statements but disclosed in the notes to the financial statements.
| 2. How are provisions measured and recognized in financial statements? | |
Ans. Provisions are measured at the best estimate of the expenditure required to settle the obligation at the reporting date. They are recognized in the financial statements when there is a present obligation as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
| 3. What are some examples of provisions commonly found in financial statements? | |
Ans. Examples of provisions include provisions for bad debts, provisions for warranties, provisions for restructuring costs, and provisions for legal claims. These provisions are made to ensure that the financial statements reflect the true financial position of the company.
| 4. How are contingent liabilities disclosed in the financial statements? | |
Ans. Contingent liabilities are disclosed in the notes to the financial statements. They are described in detail, including the nature of the contingent liability, an estimate of the financial effect, and any uncertainties surrounding the potential liability. This disclosure helps users of the financial statements to understand the potential risks faced by the company.
| 5. What is the significance of provisions and contingent liabilities in financial reporting? | |
Ans. Provisions and contingent liabilities are important in financial reporting as they ensure that the financial statements provide a true and fair view of the company's financial position. By recognizing provisions and disclosing contingent liabilities, companies can provide transparency to stakeholders about potential future obligations and risks that may impact the company's financial performance.
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