Question

Contingent liability is shown in the balance sheet because of ____________.

• A. convention of consistency
• B. convention of materiality
• C. convention of disclosure
• D. all of the above

Answer 1

Answer: (C)

convention of disclosure

Disclosure convention implies that financial statements must be prepared honestly and all the information which is of the interest of the proprietor, creditors, present and potential investors, should be fully disclosed with the accounts.

The Companies Act 2013 requires to prepare the financial statement in prescribed form and give the full disclosure about the contingent liabilities, market value of investments etc.