10 Questions
What is an obligation in accounting?
A duty or responsibility that an entity has no practical ability to avoid.
What is a necessary condition for a liability to exist in accounting?
The entity has an obligation to transfer an economic resource.
Which of the following can give rise to an obligation?
Entity's customary practices or published policies.
Is it necessary to know the identity of the counterparty for an obligation to exist?
No, it is not necessary to know the identity of the counterparty.
Can an obligation exist if the exact amount of the obligation is unknown?
Yes, an obligation can exist even if the exact amount is unknown.
What is a condition for recognizing a liability?
A present obligation as a result of past events
What is an example of an obligation to transfer an economic resource?
All of the above
What is an example of obtaining economic benefits?
Consuming utilities
When does an entity recognize a liability for ordered equipment?
When the equipment is delivered
What is required for a present obligation to exist?
The entity has taken an action or obtained economic benefits
Learn about the recognition criteria for liabilities in accounting, including the sources and conditions that require a liability to be recorded. Understand the Conceptual Framework's definition of a liability and how it differs from the layman's understanding.
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