There is no liability that can be recognized based on the mentioned case above. As stated in Conceptual
Framework Chp4,4, a liability is defined as a present obligation of the entity as a result of a past event
the settlement of which is expected to result in an outflow from the entity of resources embodying
economic benefits. This means the present obligation should be based on a past event. According to the
above case, no past event occurred because Covidibidapdap received Php80, 000 in cash in December
2020 from Romeo Limited in exchange for its financial advice service during the same year which is
considered the financial year. Also according to the essential characteristics of liability, the above case is
not included to be considered as a liability.
My answer would change from not considering liability to considering the case mentioned above as
liability. If the definition of liability is based on the Conceptual Framework Chp 4,4, enter the case in its
definition which states that the liability is a present obligation of an entity based on the past event that
occurred. Based on the case, Covidibidapdap had a past event with Romeo Limited of the service in
exchange for the cash he received from it. Covidibidapdap's obligation is to provide service to Romeo
Limited which is the financial advice for the 2021 financial year. The case also goes into the essential
characteristics of liability and these are present obligation, unavoidable obligation, and from a past
event. Additionally, the case is also included in the liability classification where within 12 months
Covidibidapdap must settle the obligation to Romeo Limited. The difference between my answer and
the previous one was due to the financial year that provided the problem. It is a big factor for an
obligation when the obligation can be settled so that it can be considered a current liability or noncurrent liability.