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    Question

    Present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation is termed as ?

    A Provision Correct Answer Incorrect Answer
    B Liability Correct Answer Incorrect Answer
    C Contingent liability. Correct Answer Incorrect Answer
    D Estimated liability Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    A provision is a present liability of uncertain amount, which can be measured reliably by using a substantial degree of estimation. It is recognized as a liability in the balance sheet and is charged as an expense to the income statement. Provisions are created to cover future expenses that are probable but not yet certain.

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