Multiple choice general knowledge

Liability arising for bills discounted is an example of which type of liability?

  1. Fictitious liability

  2. Current liability

  3. Contingent liability

  4. Long term liability
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a business discounts a bill, it creates a contingent liability because the business becomes liable to pay the bank if the original acceptor fails to pay on maturity. This liability is contingent on the default of the original debtor.

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