A contingent liability is recorded in the accounting records
A) if it will possibly become an actual liability, and the exact amount is unknown.
B) if the contingency has not already been disclosed in the notes to the financial statements.
C) under no circumstances.
D) if a reasonable estimate of the expected loss can be determined and if it is probable.

Question

Quizplus · Accepted Answer

A contingent liability is recorded in the accounting records if a reasonable estimate of the expected loss can be determined and if it is probable. This means that there is a likelihood of an actual liability occurring based on past events or experience, and a reasonable estimate can be made of the expected loss. If it is not probable or if the amount cannot be reasonably estimated, then it is disclosed in the notes to the financial statements. Under no circumstances should a contingent liability be recorded if there is no likelihood of an actual liability occurring.

A Contingent Liability Is Recorded in the Accounting Records