A contingent liability: O Is always of a specific amount Is a potential obligation that depends on a future event arising out of a past transaction or event O Is an obligation not requiring future payment O Is an obligation arising from the purchase of goods or services on credit O Is an obligation arising from a future event

A contingent liability: O Is always of a specific amount Is a potential obligation that depends on a future event arising out of a past transaction or event O Is an obligation not requiring future payment O Is an obligation arising from the purchase of goods or services on credit O Is an obligation arising from a future event

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Question

A contingent liability:
Is always of a specific amount
O Is a potential obligation that depends on a future event arising out of a past transaction or event
O Is an obligation not requiring future payment
O Is an obligation arising from the purchase of goods or services on credit
O Is an obligation arising from a future event

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