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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Tungabhadra Bank's finance team is reviewing the notes to accounts. A director asks which of the following items is shown as a contingent liability under Schedule 12 of the balance sheet rather than as an actual liability.

Guarantees given on behalf of constituents are contingent liabilities reported in Schedule 12, since payment depends on a future event. Deposits, bills payable and accrued interest on deposits are existing obligations, shown as actual liabilities.

  1. AGuarantees given on behalf of constituentsCorrect
  2. BDeposits from customers
  3. CBills payable
  4. DInterest accrued on deposits

Explanation

Schedule 12 covers contingent liabilities such as guarantees given on behalf of constituents, acceptances, endorsements and letters of credit. Deposits, bills payable and accrued interest are actual liabilities shown on the liabilities side.

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