An Example of Where an Entity Has a Present Obligation

question 2

Multiple Choice

An example of where an entity has a present obligation is:

• A) a public announcement made by an entity's management to undertake restructuring.
• B) a recommendation from the HR manager to the Board of Directors as to the level of bonuses to be paid at the end of the financial period.
• C) a historical pattern of performing a major overhaul of plant and machinery every three years.
• D) the declaration of a dividend by directors which is yet to be approved at a meeting of shareholders.

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Definitions:

Partnership

A legally recognized arrangement in which two or more persons co-manage a business and distribute its profits among themselves.

Sole Proprietorship

A business owned and operated by a single individual, with no legal distinction between the owner and the business.

Bankruptcy

A legal status of a person or entity that cannot repay debts to creditors and seeks relief through court proceedings.

Small Businesses

Enterprises characterized by smaller scale operations, fewer employees, and less revenue compared to larger corporations.