Question

Under which conventions of accounting, the contingent liabilities are shown as a footnote or explanatory notes in the balance sheet of a firm:

• A. Convention Of Full Disclosure
• B. Convention Of Materiality
• C. Convention Of Conservatism
• D. Convention Of Consistency

Answer 1

The correct option is A Convention Of Full Disclosure

Full disclosure principle is relevant to materiality concept. It requires that all material information has to be disclosed in the financial statements either on the face of the financial statements or in the notes to the financial statements. Hence, the contingent liabilities are shown as a footnote or explanatory notes in the balance sheet of a firm as per Convention of full disclosure.