Question

If the amount of any known liability can be determined with substantial accuracy.

• A. A definite liability should be created
• B. A provision should be created
• C. A reserve should be created
• D. Loss should be written off

Answer 1

The correct option is A A definite liability should be created

Liabilities are to be created in the business if these are identifiable, determine with substantial accuracy. A liability which may arise in future on happening of an event may be considered as contingent liability and to be shown as disclosure.

A known liability need to be recorded in books of account.