Question

A possible obligation that arise from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of an enterprise in known as ___________.

• A. Provision
• B. Contingent liability
• C. Contingent asset
• D. None of the above

Answer 1

The correct option is B Contingent liability

Provision are liabilities which require a substantial degree of estimation and are to be reviewed at each balance sheet date.

Contingent asset refers to a possible asset and not an obligation arising from the past events the existence of which will be confirmed only by occurrence of one or more uncertain future events not wholly within the control of an enterprise.

Therefore, as per definition of Contingent Liability, the above statement refers to Contingent Liability and not provision and contingent assets.