A Charge Following the Date of the Financial Statements to a Notes

question 95

Multiple Choice

A charge following the date of the financial statements to a notes receivable account from the cash disbursements journal should alert auditors to the possibility that a

• A) Contingent asset has come into existence following the date of the financial statements.
• B) Contingent liability has come into existence following the date of the financial statements.
• C) Provision for contingencies is required.
• D) Contingent liability has become a real liability and has been settled.

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Definitions:

Forward Contract

An individualized contract between two counterparts to acquire or dispose of an asset at a fixed price on a specified future date.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) aimed at making global financial statements more comparable.

Hedge Transactions

A financial strategy used to minimize the risk of adverse price movements in an asset, often involving derivatives like futures or options contracts.

Fair-Value Method

An accounting approach that measures and reports assets and liabilities on the basis of estimated real-world values at the current time, rather than historical purchase prices.