CA Foundation Exam > CA Foundation Notes > Accounting for CA Foundation > Unit 5: MCQ with Answer - Contingent Assets and Contingent Liabilities
Unit 5: MCQ with Answer - Contingent Assets and Contingent Liabilities | Accounting for CA Foundation PDF Download
Ques 1: Contingent asset usually arises from unplanned or unexpec ted 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).
Ans: (a)
Ques 2: If an inflow of economic benefits is probable then a contingent asset is disclosed
(a) In the financial statements.
(b) In the report of the approving authority (Board of Directors in the case of a company, and the corresponding approving authority in the case of any other enterprise).
(c) In the cash flow statement.
Ans: (b)
Ques 3: 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 sucient reliability.
(a) Liability
(b) Provision
(c) Contingent liabilities
Ans: (c)
Ques 4: Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as ________.
(a) Provision.
(b) Liability.
(c) Contingent liability.
Ans: (a)
Ques 5: In the financial statements, contingent liability is
(a) Recognised.
(b) Not recognised.
(c) Adjusted.
Ans: (b)
The document Unit 5: MCQ with Answer - Contingent Assets and Contingent Liabilities | Accounting for CA Foundation is a part of the CA Foundation Course Accounting for CA Foundation.
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FAQs on Unit 5: MCQ with Answer - Contingent Assets and Contingent Liabilities - Accounting for CA Foundation
| 1. What is a contingent asset? |  |
Ans. A contingent asset is a potential asset that may arise from uncertain future events. It is not recognized in the financial statements as it is not certain to be received. However, if it is virtually certain that the asset will be received, it is disclosed in the financial statements.
| 2. How are contingent assets disclosed in the financial statements? | |
Ans. Contingent assets are disclosed in the financial statements by way of a note, providing a description of the nature and amount of the contingent asset. This disclosure helps users of financial statements understand the potential benefits that may accrue to the entity in the future.
| 3. What is a contingent liability? | |
Ans. A contingent liability is a potential liability that may arise from uncertain future events. It is not recognized in the financial statements as it is not certain to occur. However, if it is probable that the liability will occur and can be reasonably estimated, it is recognized and disclosed in the financial statements.
| 4. How are contingent liabilities recognized and disclosed in the financial statements? | |
Ans. Contingent liabilities are recognized and disclosed in the financial statements if it is probable that a liability will occur and the amount can be reasonably estimated. They are recognized as a liability and disclosed in the financial statements by way of a note, providing a description of the nature and amount of the contingent liability.
| 5. What is the difference between a contingent asset and a contingent liability? | |
Ans. The main difference between a contingent asset and a contingent liability lies in their nature. A contingent asset is a potential future benefit that may arise from uncertain events, while a contingent liability is a potential future obligation that may arise from uncertain events. Additionally, contingent assets are not recognized in the financial statements but may be disclosed, whereas contingent liabilities are recognized and disclosed if it is probable and can be reasonably estimated.
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