Last Updated on: 17th December 2024, 12:34 pm
Contingent Assets and Liabilities Accounting MCQ
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Complete resources on Contingent Assets and Liabilities
1. When an inflow of economic benefit is probable, contingent asset will be disclosed in
(a) In financial statement
(b) In fund flow statement
(c) In cash flow statement
(d) Directors Report
A contingent asset is usually disclosed in the report of the approving authority (normally board of Directors in the case of a company) It will not be disclosed in the financial statement So, (d) is the correct answer. However, in some cases, it may be shown as note in Financial Statement.
2. Contingent liabilities where no reliable estimate can be made. are shown
(a) By way of note to Balance sheet
(b) In current liability
(c) In non-current liability
(d) In profit and loss A/c
Contingent Liabilities should be shown as note to financial statements where no reliable estimate can be made. So, option (a) is correct.
3. Contingent asset is not recognized in the financial statements on the basis of the accounting concept———-
(a) Materially
(b) Prudence
(c) Substance over from
(d) None
On the principle of prudence, contingent asset is not recognized in the financial statements. So, option (b) is correct.
3. When an inflow of economic benefit is probable, contingent asset will be disclosed in-
(a) In financial statement
(b) In fund flow statement
(c) In cash flow statement
(d) In Board of Directors Report / report of approving authority
A contingent asset is usually disclosed in the report of the approving authority (board of Directors in the case of a company) and the corresponding approving authority, in case of any other enterprise. It will not be disclosed in the financial statement
Hence Option (d) is correct
4. A present obligation that arises from past events, but is not recognized, because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, is known as
(a) Provision
(b) Contingent asset
(c) Contingent liability
(d) Liability
Contingent liability is a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation
Hence Option (c) is correct
5. Contingent liabilities where no reliable estimate can be made. are shown
(a) By way of note in Financial Statement
(b) In current liability
(c) In non-current liability
(d) Not shown in Financial Statement
Contingent Liabilities should be shown as note to financial statements where no reliable estimate can be made.
Hence Option (a) is correct
6. Contingent asset is not recognized in the financial statements on the basis of the accounting concept of ———-
(a) Materially
(b) Prudence
(c) Substance over from
(d) None
On the principle of prudence, contingent asset is not recognized in the financial statements.
Hence Option (b) is correct
7. Contingent assets usually arise from
(a) unplanned or other unexpected events
(b) planned events
(c) expected events
(d) None of the above
Contingent assets usually arise from present or past events to be confirmed by uncertain events not wholly within the control of management. So they arise from unplanned or other unexpected events.
Hence Option (a) is correct
8. Contingent asset are not recognized in the financial statements
(a) since this may result in the recognition of income that may never be realized
(b) Because even has not occurred
(c) Because no money has been received
(d) None of the above
On the principle of prudence, contingent asset is not recognized in the financial statements, since this may result in the recognition of income that may never be realized
Hence Option (a) is correct
