Question: State whether the following would be recognised as a liability. If so, what account name would you use? 1. The company has a legal obligation

State whether the following would be recognised as a liability. If so, what account name would you use?

1. The company has a legal obligation via contract to repair any deficiencies occurring in the first two years in the buildings it constructs.

2. The company has no legal obligation but as a matter of course it repairs any deficiencies occurring in the first two years in the buildings it constructs. This policy has helped it retain a good reputation in the industry.

3. Based on the preliminary financial results the company expects to pay a bonus of $1 million to staff. The company has now paid bonuses to staff for the last 10 years.

4. At the end of the year it is calculated that staff have on average taken 13 of their 20 days of annual leave.

5. The company has signed the contract to purchase a piece of equipment worth $300 000. The equipment will be delivered to it in three weeks and will be installed in the following week.

6. The company has guaranteed a loan of $1.2 million for one of its very profitable subsidiaries.

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