Question

1. Conceptually, liabilities constitute a present obligation as a result of a past event and entail an expected future sacrifice of assets or services.

                                                True or False

2. A reasonable expectation on the part of a company's stakeholders arising from a company's past practices or behaviour may constitute a constructive obligation in certain instances.
                                                                True or False

3. A contingency may become a provision if the likelihood of the contingent event greatly increases.
                                                                True or False

4. Loan guarantees are only recorded if they are likely to be paid.
                                                                True or False

5. Accrued liabilities made due to routine operating expenses are not normally discounted.
                                                True or False

6. Executory contracts seldom require a journal entry, while onerous contracts do.
                                                                True or False

7. Under the warranty expense approach, there should be no income statement effects for warranty repairs performed after the year of sale (assuming that accrued warranty expenses and expenditures equal one another).
                                                                True or False

8. A lawsuit in progress wherein the defendant will probably be found guilty would likely be accounted for as a provision.

True or False

9. Current liabilities are usually discounted.
                                                True or False

10. A decline in value of a company's reporting currency relative to the foreign currency in which it has payables will result in a foreign exchange gain on the reporting company's books.
                                                                True or False

Answer 1

Ques No.	Answer	Reason
1	TRUE	Liabilties are obligations due to past events that may require otuflow of resources or decrease in financial assets or increase in financial liabilities
2	FALSE	These are not contraced costs but are intentions of the company on their part towards the stakeholders
3	FALSE	A provision is made when there is probable chance (more than 50%) and the amount can be determined
4	FALSE	Loans. Gaurantees are recognised in books when incurred
5	FALSE	All liabiities in the books are recognised at their present value
6	FALSE	All contracts bringing financial implications to the company are recorded be it executionary or onerous contracts
7	FALSE	If the warranty expense exceed the provision for warranty expense the income statement will be effected debiting the expense
8	FALSE	A provision is made when there is probable chance (more than 50%) and the amount can be determined
9	FALSE	these are not discounted because these are usually paid within the next 12 months
10	FALSE	The liability increases , resulting in loss because you will have to pay higher local currecny to buy foreign currency for payment