Forums
Back
AS 29
Accountancy
The answer given to the question is option c but how is it, Please clarify me
Answers (4)
1.Provision is a probable outflow of cash (must be settled to the lawyer irrespective of win or lose) 2.Contingent liabilities are not probable ( if z ltd wins they don't want to pay otherwise it must pay there is fifty fifty chances ) So the provision was rs.50k and contingent liabilities was rs 5L
but it is a case filed by Z Ltd against Y Ltd and the lawyers of Y Ltd have advised that the company ( Y Ltd) is likely to lose and that the chance of paying the claim is not remote - it doesn't mean that the Z Ltd will possibly win and get the claim which will be contingent asset
Thread Starter
NANDHINI U Sbut it is a case filed by Z Ltd against Y Ltd and the lawyers of Y Ltd have advised that the company ( Y Ltd) is likely to lose and that the chance of paying the claim is not remote - it doesn't mean that the Z Ltd will possibly win and get the claim which will be contingent asset
Question is not worded properly. If Z ltd loses, they wont have to pay out anything. And the question is not clear on this either.
