Skip to content

CA Intermediate · Advanced Accounting · AS 4 Contingencies and Events occurring after the Balance Sheet Date

Narmada Steels Ltd. has a year-end of 31 March 2025. The board approved the accounts on 30 May 2025. A suit by a supplier claiming ₹12,00,000 was pending at year end, and the company had made no provision. On 15 April 2025, the court decided the case against the company and ordered payment of ₹9,00,000. What amount should be recognised as a provision in the 2024-25 accounts?

The company should provide ₹9,00,000 in 2024-25. The court's decision after the balance sheet date confirms a present obligation arising from a suit pending at year end, making it an adjusting event, and the provision is measured at the ordered amount rather than the claimed ₹12,00,000.

  1. ANil, with disclosure of a contingent liability of ₹12,00,000
  2. B₹3,00,000
  3. C₹9,00,000Correct
  4. D₹12,00,000

Explanation

The court judgment after the balance sheet date confirms an obligation that existed at 31 March 2025 from the pending suit, so it is an adjusting event. The liability is the amount decided, ₹9,00,000, not the amount claimed (₹12,00,000). The difference of ₹3,00,000 is not the liability.

Did you get it right without looking?

One question tells you little. A timed set on AS 4 Contingencies and Events occurring after the Balance Sheet Date shows your real accuracy, how long you take and where you lose marks.

Practise AS 4 Contingencies and Events occurring after the Balance Sheet DateFree diagnostic mock

More AS 4 Contingencies and Events occurring after the Balance Sheet Date questions