Correct option is B
The correct answer is (b) Contingent Liability
Explanation:
• A contingent liability is a possible obligation that arises from past events, whose existence will be confirmed only by the occurrence or non-occurrence of future uncertain events.
• It is not a current liability, as it is not certain or due for payment at present.
• Examples include pending court cases, guarantees, or disputed tax claims.
• It is disclosed as a footnote in the Balance Sheet, not recorded as a liability.
Information Booster:
• Current Liabilities are obligations payable within 12 months from the reporting date.
• Examples: Creditors, Bills Payable, Outstanding Expenses, Short-term Loans.
• Contingent liabilities are governed by AS-29 (Provisions, Contingent Liabilities & Contingent Assets).
• They are not recorded but disclosed for transparency.
• Helps in assessing potential financial risks of an enterprise.
Additional Knowledge:
• Interest Outstanding on Debentures: Current liability, as it is payable soon.
• Bills Payable: Written promise to pay a creditor; current liability.
• Trade Creditors: Amount owed to suppliers; current liability.
English
80 Questions
160 Marks
60 Mins
