During 2020, Peach Company purchased a machine for P7,000,000 and received a government grant of 1,000,000 toward the capital cost.   The machine is to be depreciated on a straight-line method basis over 5 years and estimated to have a residual value of P500,000 at the end of this period. Required: Prepare journal entries using Deferred Income Approach and Deduction from Asset Approach

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Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.