Question

Proposed dividend is shown as contingent liability.

Hint:

Proposed dividend = provision, not a contingent liability.

Answer 1

Proposed dividend becomes a definite obligation once recommended by the board of directors, and therefore it is recorded under "Short-term Provisions." Contingent liabilities depend on uncertain future events such as legal disputes or guarantees. Proposed dividend does not depend on uncertainty; it is payable to shareholders unless the company withdraws the proposal before approval. As per accounting standards, proposed dividend is a provision, not a contingent liability.