[amp_mcq option1=”contingent liabilities” option2=”other liabilities and provisions” option3=”contingent account” option4=”other accounts” correct=”option2″]
The correct answer is: B. other liabilities and provisions.
Banks show provision for income tax under the head “other liabilities and provisions” in their balance sheets. This is because the provision for income tax is a liability that the bank has to pay to the government in the future. It is not a contingent liability, which is a liability that may or may not arise in the future. It is also not a contingent account, which is an account that is used to track potential liabilities that may arise in the future.
The provision for income tax is calculated by multiplying the bank’s taxable income by the tax rate. The tax rate is determined by the country in which the bank is located. The provision for income tax is a significant expense for banks, and it can have a major impact on their profitability.
Here is a brief explanation of each option:
- A. Contingent liabilities: These are liabilities that may or may not arise in the future. For example, a bank may have a contingent liability if it is involved in a lawsuit.
- B. Other liabilities and provisions: These are liabilities that are not classified as current liabilities or long-term liabilities. The provision for income tax is an example of an other liability and provision.
- C. Contingent account: This is an account that is used to track potential liabilities that may arise in the future. For example, a bank may have a contingent account if it is involved in a lawsuit.
- D. Other accounts: This is a general category that includes all accounts that do not fit into any of the other categories. The provision for income tax is not an other account.