S1: Under Ind AS 115, a 'Contract Asset' is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer, when that right is conditioned on something other than the passage of time. S2: A 'Contract Liability' is an entity's obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. Which statement(s) is/are correct? MCQ with Answer and Explanation
S1: Under Ind AS 115, a 'Contract Asset' is an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer, when that right is conditioned on something other than the passage of time. S2: A 'Contract Liability' is an entity's obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. Which statement(s) is/are correct?
A. Both S1 and S2
B. S1 only
C. Neither S1 nor S2
D. S2 only
Answer: Option A
Solution (By JKSSB Mock Tests)
Both statements correctly define Contract Asset and Contract Liability as per Ind AS 115. A contract asset is conditional on future performance, while a receivable is unconditional. A contract liability is the obligation to perform after receiving payment.
Explanation:
Vouching is considered the backbone of auditing because it provides the primary evidence for the transactions recorded. It verifies authenticity by checking supporting documents. R correctly explains why it is the backbone.
S1: Under Ind AS 19, actuarial gains and losses on defined benefit plans are recognized in Other Comprehensive Income (OCI). S2: These actuarial gains and losses recognized in OCI are subsequently reclassified to the Profit and Loss account in future periods. Which statement(s) is/are correct?
Explanation:
Ind AS 19 requires remeasurements (actuarial gains/losses) of defined benefit plans to be recognized in OCI. S2 is incorrect because these amounts are recognized directly in retained earnings and are NOT reclassified (recycled) to P&L in subsequent periods.
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