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

Question
A 'Provision' is recognized when:
A. There is a present obligation, probable outflow, reliable estimate
B. Management decides
C. For all future losses
D. It is certain
Answer: Option A
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
A liability arising from a past event, whose existence depends on a future uncertain event, is known as:
A. Current Liability
B. Contingent Liability
C. Deferred Liability
D. Fixed Liability
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Correct Answer: Option B

Explanation:
Contingent liabilities depend on the outcome of a future event (like a pending lawsuit) and are disclosed in footnotes.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #2
The concept of 'Management by Exception' is applied in:
A. Standard costing and budgetary control
B. Tax accounting
C. Financial accounting
D. Audit only
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Correct Answer: Option A

Explanation:
Management by exception focuses on significant variances between actual and standard/budgeted performance, ignoring minor deviations.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
Question #3
Which formula determines the Return on Equity (ROE)?
A. Gross Profit / Sales
B. Operating Profit / Capital Employed
C. Net Profit available to Equity Shareholders / Equity Shareholder's Funds
D. Net Profit / Total Assets
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Correct Answer: Option C

Explanation:
ROE measures the profitability of equity funds, showing how much profit a company generates with the money shareholders have invested.
This question belongs to: Accountancy and Statistics Accountancy and Book Keeping
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