Contingent liability is shown in the balance sheet: MCQ with Answer and Explanation

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Contingent liability is shown in the balance sheet:

A. Under current liabilities

B. Under provisions

C. As a footnote

D. As an asset

Answer: Option C

Solution (By JKSSB Mock Tests)

Contingent liabilities are disclosed by way of notes to accounts, not as a liability in the balance sheet.

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

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Practice More Accountancy and Book Keeping Questions

Question #1

The primary purpose of preparing a Bank Reconciliation Statement (BRS) is to:

A. Calculate bank interest

B. Identify causes of difference between cash book and pass book balances

C. Correct errors in the ledger

D. Determine the net profit

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Correct Answer: Option B

Explanation:
BRS is prepared to reconcile the bank balance as per the cash book with the balance as per the bank statement (pass book).

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

Question #2

S1: Prudence concept requires recognizing anticipated losses but not anticipated profits. S2: Materiality concept allows ignoring trivial items. Which statement(s) is/are correct?

A. S2 only

B. Neither S1 nor S2

C. Both S1 and S2

D. S1 only

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Correct Answer: Option C

Explanation:
Prudence ensures conservatism by providing for all foreseeable losses but not anticipating profits. Materiality allows accountants to bypass strict accounting rules for insignificant items. Both are correct.

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

Question #3

In the Balance Sheet, 'Patents' are shown under:

A. Current liabilities

B. Fixed assets – Intangible

C. Current assets

D. Investments

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Correct Answer: Option B

Explanation:
Patents are intangible fixed assets.

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

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