What is a contingent liability? and how is it treated in dissolution?
Answers
Answered by
17
Contingent Liability does not appear in Balance Sheet.
In case of Dissolution, if the question specifies that the contingent liability is paid then it will appear on the Debit side of Realisation A/c as "Bank A/c". If nothing is mentioned, there will be no treatment.
Similarly, in case of Retirement,
For instance, Workmen compensation reserve is Rs 5,000 and in the adjustments claim against the workmen compensation is Rs 7,000.
--> Rs 2,000 will appear on the Revaluation A/c on the debit side.
--> Rs 7,000 will appear on the Balance Sheet Liabilities side.
In case of Dissolution, if the question specifies that the contingent liability is paid then it will appear on the Debit side of Realisation A/c as "Bank A/c". If nothing is mentioned, there will be no treatment.
Similarly, in case of Retirement,
For instance, Workmen compensation reserve is Rs 5,000 and in the adjustments claim against the workmen compensation is Rs 7,000.
--> Rs 2,000 will appear on the Revaluation A/c on the debit side.
--> Rs 7,000 will appear on the Balance Sheet Liabilities side.
Similar questions