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

question 2

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:

Direct Write-off Method

An accounting approach where uncollectible accounts receivable are directly written off against income at the time they are deemed unrecoverable.

Uncollectible Accounts Receivable

Debts owed to a company that are considered to be uncollectible from the debtor, often leading to the account being written off as a bad debt expense.

Allowance for Doubtful Accounts

An estimate of the amount of accounts receivable that may not be collectible, serving as a contra account to adjust the value of total receivables.

Net Realizable Value

The estimated selling price of an asset in the ordinary course of business minus any costs associated with its sale or disposal.