A contingent liability is recorded in the accounting records
A) if the contingency has not been described already in the notes to the financial statements.
B) if it probably will become an actual liability and the exact amount is known.
C) under all circumstances.
D) if it probably will become an actual liability and the amount can be reasonably estimated.

Question

Quizplus · Accepted Answer

A contingent liability is recorded in the accounting records if it probably will become an actual liability and the amount can be reasonably estimated. This is in accordance with the accounting principle of conservatism, where potential losses are recognized in the financial statements as soon as they become probable and can be estimated with reasonable accuracy.

A Contingent Liability Is Recorded in the Accounting Records