Contingent liability : A contingent liability is not an actual liability but a potential liability which may or may not convert into an actual liability on the occurrence or non-occurrence of an event. The contingent liabilities which are probable and the amount can be reasonably estimated are recorded in the books of accounts. If the contingency is not probable of occurring or the amount cannot be ascertained, then it will not be recorded in the books but will be disclosed in the notes to the accounts. To explain: The contingent liability with examples

Question

Want to see the full answer?

Answer 1

Question

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.

Chapter 11, Problem 13RQ

To determine

Contingent liability:

A contingent liability is not an actual liability but a potential liability which may or may not convert into an actual liability on the occurrence or non-occurrence of an event. The contingent liabilities which are probable and the amount can be reasonably estimated are recorded in the books of accounts. If the contingency is not probable of occurring or the amount cannot be ascertained, then it will not be recorded in the books but will be disclosed in the notes to the accounts.

To explain:

The contingent liability with examples

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Questions:- On March 1, 2019, Alpha Company's beginning work-in-process inventory had 8,000 units. This is its only production department. Beginning WIP units were 50% completed to conversion costs. Alpha introduces direct materials at the beginning of the production process. During March, a total of 15,000 units were started and a total of 20,000 units were completed. Alpha's ending WIP inventory had 3,000 units which were 70% completed to conversion costs. Alpha uses the weighted average method. Use this information to determine for March 2019 the equivalent units of production for conversion costs

Please give answer step by step

What role should the precautionary principle play in the development and application of accounting standards? Discuss the potential tensions that may arise between the need for financial transparency and the desire to mitigate against excessive risk-taking or overly optimistic reporting.

Answer 2

Question

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.

Chapter 11, Problem 13RQ

To determine

Contingent liability:

A contingent liability is not an actual liability but a potential liability which may or may not convert into an actual liability on the occurrence or non-occurrence of an event. The contingent liabilities which are probable and the amount can be reasonably estimated are recorded in the books of accounts. If the contingency is not probable of occurring or the amount cannot be ascertained, then it will not be recorded in the books but will be disclosed in the notes to the accounts.

To explain:

The contingent liability with examples

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

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.

Chapter 11, Problem 13RQ

To determine

Contingent liability:

A contingent liability is not an actual liability but a potential liability which may or may not convert into an actual liability on the occurrence or non-occurrence of an event. The contingent liabilities which are probable and the amount can be reasonably estimated are recorded in the books of accounts. If the contingency is not probable of occurring or the amount cannot be ascertained, then it will not be recorded in the books but will be disclosed in the notes to the accounts.

To explain:

The contingent liability with examples

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

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.

Chapter 11, Problem 13RQ

To determine