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1.26   Theoretical Framework                      Principles and Practices of Accounting  Paper       1









                                                       Possible

                                                      Obligation












                                    Arising out of         +        Existence is
                                     past events                   confirmed by













                                     Occurrence
                                                                     Not wholly
                                         or non                    within control
                                    occurance of                        of the
                                     one or more
                                         events                      enterprise




                                      Fig. 1.8  Contigent Liability – Definition A





                       A present obligation from past events is not

                                            recognised because





                      It is not probable that outflow of economic
                                   resoures will be requires (OR)




                                       A reliable estimate of the

                                       amount cannot be made



                                      Fig. 1.9  Contigent Liability – Definition B




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