Question

Reduction in liability is

• A. Loss
• B. Profit
• C. Receipts
• D. Expenditure

Hint:

A reduction in liability is treated as a loss since it means a decrease in the financial obligations of a business.

Answer 1

The Correct Option is A

Step 1: Understanding reduction in liability.
A reduction in liability is considered a loss because it represents a decrease in what the business owes. A liability reduction means that the company does not need to pay as much as originally expected, leading to a reduction in financial obligations.
Step 2: Analyzing the options.
- (A) Loss: This is correct. When a liability decreases, it is considered a loss for the business.
- (B) Profit: This is incorrect. Profit is related to revenue and income, not a reduction in liability.
- (C) Receipts: This is incorrect. Receipts refer to incoming cash, not the reduction of liabilities.
- (D) Expenditure: This is incorrect. Expenditure refers to expenses, while reduction in liability deals with the company’s financial obligations.
Step 3: Conclusion.
The correct answer is (A) Loss, as a reduction in liability represents a decrease in financial obligations.
Final Answer: The correct answer is (A) Loss.