The 'Provision' for warranty is an example of: MCQ with Answer and Explanation

The 'Provision' for warranty is an example of:
A. Reserve
B. Contingent liability not recognised
C. Liability
D. Asset
Answer: Option C
Solution (By JKSSB Mock Tests)
Warranty provision meets recognition criteria (present obligation, probable outflow, reliable estimate) and is recorded as a liability.

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Practice More Accountancy and Book Keeping Questions

Question #1
Which of the following is a 'Voucher' in a manual accounting system?
A. A documentary evidence of a transaction
B. Both B and C
C. A cash memo
D. A printed receipt

Correct Answer: Option B


Explanation:
Voucher includes any documentary evidence like cash memo, invoice, receipt.

Question #2
S1: In the case of admission of a partner, if the new partner brings his share of goodwill in cash, the existing partners' capital accounts are credited in their sacrificing ratio. S2: If the new partner is unable to bring his share of goodwill in cash, the goodwill account is opened in the books of the firm. Which statement(s) is/are correct?
A. S2 only
B. Both S1 and S2
C. S1 only
D. Neither S1 nor S2

Correct Answer: Option C


Explanation:
S1 is correct. S2 is incorrect because AS 26 prohibits the recognition of self-generated goodwill in the books; hence, the goodwill account cannot be opened. Instead, the adjustment is passed through the partners' capital accounts.

Question #3
The 'Penalty' for not issuing a GST invoice is:
A. 25% of tax
B. No penalty
C. Fixed amount
D. 100% of tax due or ₹10,000, whichever is higher

Correct Answer: Option D


Explanation:
Section 122 provides penalty of ₹10,000 or tax amount, whichever higher, for not issuing invoice.