A 'Provision' is recognized when: MCQ with Answer and Explanation

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A 'Provision' is recognized when:

A. It is certain

B. Management decides

C. For all future losses

D. There is a present obligation, probable outflow, reliable estimate

Answer: Option D

Solution (By JKSSB Mock Tests)

As per AS 29, provision is recognized when these three conditions are met.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

Which of the following is a feature of cash-based accounting?

A. Simple to maintain

B. Recognizes revenue when earned

C. Records credit transactions

D. Provides a true and fair view of financial position

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Correct Answer: Option A

Explanation:
Cash-based accounting is very simple to maintain as it only records actual cash inflows and outflows, ignoring credit transactions and accruals.

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Question #2

When a trial balance tallies, it provides:

A. Proof that no frauds occurred

B. Prima facie evidence of arithmetical accuracy

C. Conclusive proof of accuracy

D. Proof that all accounting standards are followed

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Correct Answer: Option B

Explanation:
A tallied Trial Balance only guarantees arithmetical accuracy; errors of principle or complete omission might still exist.

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Question #3

The 'Going Concern' evaluation period as per SA 570 is:

A. At least 12 months from the balance sheet date

B. 6 months

C. Not defined

D. Indefinite

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Correct Answer: Option A

Explanation:
Management assesses going concern for at least 12 months from the reporting date.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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