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    Question

    Which of the following Liabilities are not shown in the Balance Sheet?

    A Bank guarantee issued by a bank Correct Answer Incorrect Answer
    B Provision for tax Correct Answer Incorrect Answer
    C Loans taken from the bank Correct Answer Incorrect Answer
    D Capital withdrawn by the promoter Correct Answer Incorrect Answer
    E Goods sold on credit to customer Correct Answer Incorrect Answer

    Solution

    A bank guarantee is a type of guarantee from a bank given to a third party on behalf of the company ensuring the third party that if the company defaults or fails to pay, the bank will pay instead. This guarantee lets a company buy what it otherwise could not, helping business growth. As such, a Bank guarantee is a not an actual liability but a probable liability and shown as a contingent liability in the notes of accounts and not on the balance sheet. Contingent liabilities are off-balance sheet item and will be introduced to the balance sheet on the happening of an uncertain future event.

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