One of your junior staff members has few queries on the recognition of a liability. He understands that 'A liability is a present obligation of the…

CA Intermediate · Advanced Accounting · RTP · September 2026
One of your junior staff members has few queries on the recognition of a liability. He understands that 'A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. Which of the following would be classified as liability?
(A) (A) X & Co, is planning to invest in new machinery and has received a quoted price of ₹4,60,000.
(B) (B) P & Co, has estimated a current tax charge of ₹ 2,25,000 on its profits for the year just ended.
(C) (C) R & Co's business manufactures a product under license. In 8 months' time the license is due to expire, and R will have to pay ₹1,54,000 to get the license renewed.
(D) (D) S & Co, purchased investments some 6 months ago for 12 lakhs. The market value of these investments has now fallen, and S's investments are now valued at 10.5 lakhs.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

(B) P & Co, has estimated a current tax charge of ₹ 2,25,000 on its profits for the year just ended.

Topics: Framework for preparation and presentation of financial statements

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