A liability is defined in conceptual framework as:
A) possible obligation of the entity, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
B) a possible obligation of the entity expected to arise from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
C) a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
D) a present obligation of the entity arising from past events, the settlement of which is expected to result in an inflow to the entity of resources embodying economic benefits.

Question

Quizplus · Accepted Answer

According to the conceptual framework, a liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Therefore, option C is the correct choice. Option A describes a possible obligation, which does not necessarily meet the definition of a liability. Option B describes a future obligation, which also does not meet the definition of a liability. Option D describes a present obligation that will result in an inflow to the entity, which is not the definition of a liability either.

A Liability Is Defined in Conceptual Framework As