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AS 29
Accountancy
Question:- Chaos ltd entered into an agreement to supply 1 lac face masks to D ltd by 30th April 2022, failing which it will have to pay a penalty of Rs 10 per item not supplied .On 31st March 2022 chaos ltd assessed it could not supply 50000 face masks to D ltd on 30th april 2022. Doubt: in this question why cant i say there is present obligation for chaos ltd to pay penalty for 50000 goods as on 31st march 2022 since chaos ltd themselves has estimated that they wouldnt be abled to supply 1 lac goods to D ltd within time.
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Best Answer
In this scenario, Chaos Ltd.'s assessment that they cannot supply 50,000 face masks does not in itself create a present obligation to pay the penalty. The obligation to pay the penalty arises only if Chaos Ltd. actually fails to supply the face masks by the deadline of 30th April 2022. Until that point, there is no present obligation because the event (failure to supply) has not occurred. The obligation to pay the penalty only arise on the actual date agreed-upon deadline
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