Contingent Assets and Liabilities Accounting MCQ

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  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 sheetContingent Liabilities should be shown as note to financial statements where no reliable estimate can be made. So, option (a) is correct.
(b)In current liability  
(c)In non-current liability  
(d)In profit and loss A/c  

3. Contingent asset is not recognized in the financial statements on the basis of the accounting concept———-

(b)PrudenceOn the principle of prudence, contingent asset is not recognized in the financial statements. So, option (b) is correct.
(c)Substance over from