Based on this data, explain if and under what conditions at the end of the year the profit of the period will be equal to the cash in the company's coffers. Give two or three examples to justify your answer.

Based on this data, explain if and under what conditions at the end of the year the profit of the period will be equal to the cash in the company's coffers. Give two or three examples to justify your answer.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter19: Corporations: Distributions Not In Complete Liquidation

Section: Chapter Questions

Problem 3DQ

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

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A company started its activity on 02.01.20X1 and the shareholders contributed all the capital in kind. No profits were made during that year.
Based on this data, explain if and under what conditions at the end of the year the profit of the period will be equal to the cash in the company's coffers. Give two or three examples to justify your answer.

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