Which of the Following Items Would NOT Be Recognised as a Liability

question 8

Multiple Choice

Which of the following items would NOT be recognised as a liability?

• A) Advances from customers for goods and services to be delivered later
• B) Warranty on products sold during the year
• C) Final dividend recommended by directors,prior to the annual meeting
• D) A dispute with a customer where there is some possibility that the company could lose the dispute

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Definitions:

Gross Profit

The difference between the sales and the cost of goods sold, representing the basic profitability of the products or services sold.

Franchise Agreement

A legal contract in which a franchisor grants the right to operate a business using its brand and system to a franchisee in return for a fee.

Initial Franchise Fee

An upfront cost that a franchisee pays to a franchisor for the rights to use the brand and operate under the franchise agreement.

Recorded as Revenue

The recognition of income when earned by the company, typically upon delivery of goods or completion of services.