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:

Cumulative

Describing a total that includes all amounts accumulated over a period of time, often used in the context of dividends that are accrued and paid at a later date.

Nonparticipating

Typically refers to insurance policies or investment plans where the holder does not share in profits or dividends beyond specified benefits.

Par Value

The nominal or face value assigned to a share of stock or a bond by the issuer.

Noncumulative

A type of preferred stock on which dividend payments are not accumulated if they are not declared.