QUESTIONS - THEORY

1. Which of the following is not a characteristic of a liability?

a. The obligation must be settled to an identified party
b. It is a present obligation that entails settlement by probable future transfer or use of
cash, goods or services.
c. The liability must be an unavoidable obligation.
d. The transaction or event creating the obligation must have already occurred.
2. Which of the following is a current liability
a.
b.
c.
d.

Dividends in arrears on preference share

A dividend payable in the form of additional ordinary shares
A cash dividend payable to preference shareholders
All of these

3. It is a marketing scheme whereby an entity grants award credits to customers and the
entity can redeem the award credits in exchange for free or discounted goods or services.
a. Customer loyalty program c. Marketing program
b. Premium plan
d. Loyalty program
4. A provision is an obligation that is uncertain as to
a.
b.
c.
d.

Amount
Yes
Yes
No
No

Existence
Yes
No
Yes
No

5. An outflow of resources embodying economic benefits is regarded as probable when

a. The probability that the event will occur is greater than the probability that the event
will not occur.
b. The probability that the event will not occur is greater than the probability that the
event will occur
c. The probability that the event will occur is the same as the probability that the event
will not occur.
d. The probability that the event will occur is 50% likely.
ANSWERS THEORY
1. A
2. D
3. A
4. A
5. B