Practicing Success
Practicing Success
CUET Preparation Today
| Which one of the following is Commitment in the financial statements of a company? |
Unclaimed Dividend Dividend Arrears on Cumulative Preference Shares Proposed Dividend Interim Dividend |
| Dividend Arrears on Cumulative Preference Shares |
| A commitment is a promise made by a company to external stakeholders and/or parties resulting from legal or contractual requirements. On the other hand, a contingency is an obligation of a company, which is dependent on the occurrence or non-occurrence of a future event. Only dividend arrears are a part of commitment. Following the IFRS principles and guidelines, commitments must be recorded as a liability for an entity for the accounting period they occur In, and they must be disclosed in the notes to the financial statements. It is for the business to show that it is efficiently fulfilling its commitments. If an entity is unable to meet its commitments, a justification needs to be disclosed in the notes to the financial statements, detailing the “nature, timing extent of commitment and the causes.” |
