INTERVIEW QUESTIONS ACCOUNTING PROCESS CONTINGENT ASSETS AND CONTINGENT LIABILITIES DETAILS

Question: Which of the following is not a difference between a provision and contingent liability? a) A provision meets the recognition of criteria whereas a contingent liability fails to meet the same. b) Provision is a present liability of uncertain amount whereas contingent liability is a possible obligation which arises from past event. c) Provision can't be measured whereas contingent liability can be accurately measured. d) None of the above

Answer: (c) Provision can't be measured whereas contingent liability can be accurately measured.
Description: Following are the differences between provision and contingent liability:-
1. Provision is a present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation whereas contingent liability is a possible obligation that may or may not crystallize depending upon one or more uncertain future events.
2. Provision meets the recognition criteria whereas contingent liability fails to meet the same.
Thus option (c) is not correct.

(c) Provision can't be measured whereas contingent liability can be accurately measured.
Description: Following are the differences between provision and contingent liability:-
1. Provision is a present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation whereas contingent liability is a possible obligation that may or may not crystallize depending upon one or more uncertain future events.
2. Provision meets the recognition criteria whereas contingent liability fails to meet the same.
Thus option (c) is not correct. Source: CoolInterview.com

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