Distinguish between an actual liability and a contingent liability. Give an example of 3 different types of contingent liabilities and how they may exist in a company.
Distinguish between an actual liability and a contingent liability. Give an example of 3 different types of contingent liabilities and how they may exist in a company.
Distinguish between an actual liability and a contingent liability. Give an example of 3 different types of contingent liabilities and how they may exist in a company.
Problem 8: Distinguish between an actual liability and a contingent liability. Give an example of 3 different types of contingent liabilities and how they may exist in a company.
Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.
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