Question
In: Accounting
‘A provision and a contingent liability are the same.’ Discuss.
‘A
provision and a contingent liability are the same.’
Discuss.
Solutions
Expert Solution
A provision and a contingent liability are not the same.
A provision is an amount set aside from the profits of a company to meet an expected liability at an uncertain time in the future or to decrease the value of an asset. The amount of the liability can be reasonably estimated. A provision is recorded as an expense and a related liability is incurred. Provisions may be recorded for estimated bad debts, inventory obsolescence, depreciation of assets, etc.
A contingent liability is an expected liability that may occur in future if the outcome of an uncertain event is unfavorable to the company. Usually a contingent liability is not recorded unless it is probable and the amount of liability can be resonably estimated.
Thus, the difference between a provision and a contingent liability is that, the occurence of liability in case of a provision is certain but the time of its occurence is not certain. Whereas in case of a contingent liability neither the occurence of the liability is certain nor its time is certain.
ekkarill92 answered 1 year agoRelated Solutions
What is a contingent liability? What conditions require that a contingent liability be recognized as a...
What is a contingent liability? What conditions require that a
contingent liability be recognized as a liability in the books?
What is a contingent liability? Give an example of a contingent liability that is usually recorded...
What is a contingent liability?
Give an example of a contingent liability that is usually
recorded in the accounts in current period even though it is Still
a Contingent liability now (Not a liability).
Under what circumstances is a contingent liability disclosed
only in the notes to the financial statements? Under what
circumstances is a contingent liability not recorded in the
accounts nor disclosed in the notes to the financial
statements?
Please discuss the accrued liability with at least two examples. What is a contingent liability? What...
Please discuss the accrued liability with at least two examples.
What is a contingent liability? What happens to your balance sheet
and income statements when you failed (intentionally or
unintentionally) to recognize liability at year end? Please discuss
bond discount, premium and par issues. When do they issue bonds
with discount? with premium? How are discount or premium amortized
over the life over the bonds? How the amortization (discount or
premium) affect the interest expenses? Please briefly discuss the
concept...
How can a contingent liability be recognized in a liability and how is it related to...
How can a contingent liability be recognized in a liability and
how is it related to accounting theory?
What is a contingent liability? List the three categories of contingent liabilities. Our contingent liabilities recorded...
What is a contingent liability? List the three categories of
contingent liabilities. Our contingent liabilities recorded on a
company’s books? Explain. What is the difference in accounting
procedures for liability that is probable an estimate a book and
one that is reasonably possible but not us to Mobil?
What is a contingent liability? min 200 words
What is a contingent liability? min 200 words
1. Define contingent liabilities and describe the types of events that might create a contingent liability....
1. Define contingent liabilities and describe the types of
events that might create a contingent liability. Describe places
auditors might look for contingent liabilities.
2. Explain how auditors treat events that occur after the end of
the fiscal year being audited but before the audit opinion has been
issued. Describe steps auditors use to identify those events.
Research the topic of contingent liabilities and identify a specific real or theoretical contingent liability. Compose...
Research the topic of contingent liabilities and
identify a specific real or theoretical contingent
liability.
Compose a recommendation that covers the
following:
Describes the contingent liability you have
selected.
Recommends whether this contingent liability should be
reported and why or why not. (Be sure to include GAAP support for
your conclusion!)
If you recommend reporting of this contingent
liability, justify how it would be reported
Define contingent liabilities and describe the types of events that might create a contingent liability. Describe...
Define contingent liabilities and describe the types of events
that might create a contingent liability. Describe places auditors
might look for contingent liabilities.
What is the criteria for determining if a contingent liability needs to be reported on the...
What is the criteria for determining if a contingent liability
needs to be reported on the financial statements? How is the value
of a contingent liability determined?
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- I have a problem with my code. It does not run. Please can someone check the...
- As discussed in the text, in the absence of market imperfections and tax effects, we would...
- //This is an ArrayReverser Problem.. import java.util.Scanner; public class Main { public static void main(String[] args)...
- After completing its capital spending for the year, Carlson Manufacturing has $1,100 extra cash. Carlson’s managers...
- Question 2: How can we find the real root of a polynomial with one variable? Also...
- Apply the Cognitive/Affective/Behavior Attitude model to a day to day personal life experience at work, home...
- you may not use the Python ord() or chr() functions you may not use the Python...
ADVERTISEMENT