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Business Accounting FINANCIAL ACCT-CONNECT

1. Introduction : A civil activity brought in the court of law in which a party has incurred loss due to the action of defendant, to demand compensation by a plaintiff is called a law suit. To identify: The accounting treatment. The company records it in the notes of the financial statement The estimate damage from lawsuit pending for company M is $1250000 but it will be a future event possibly so it is required disclosing in the notes of the financial statement. 2. Introduction : A civil activity brought in the court of law in which a party has incurred loss due to the action of defendant, to demand compensation by a plaintiff is called a law suit. To identify: The accounting treatment. The amount of contingent liability become an item only disclosed in the financial statement and not be recorded The pending law suit is not reasonable estimable so it is a probable loss for company M. Thus the amount of contingent liability become an item only disclosed in the financial statement and not be recorded 3. Introduction : A civil activity brought in the court of law in which a party has incurred loss due to the action of defendant, to demand compensation by a plaintiff is called a law suit. To identify: The accounting treatment. Company should record the amount as liability The damage estimated by the company M us $3500000 in a case with a high probability of losing the case. Thus company should record the amount as liability

1. Introduction : A civil activity brought in the court of law in which a party has incurred loss due to the action of defendant, to demand compensation by a plaintiff is called a law suit. To identify: The accounting treatment. The company records it in the notes of the financial statement The estimate damage from lawsuit pending for company M is $1250000 but it will be a future event possibly so it is required disclosing in the notes of the financial statement. 2. Introduction : A civil activity brought in the court of law in which a party has incurred loss due to the action of defendant, to demand compensation by a plaintiff is called a law suit. To identify: The accounting treatment. The amount of contingent liability become an item only disclosed in the financial statement and not be recorded The pending law suit is not reasonable estimable so it is a probable loss for company M. Thus the amount of contingent liability become an item only disclosed in the financial statement and not be recorded 3. Introduction : A civil activity brought in the court of law in which a party has incurred loss due to the action of defendant, to demand compensation by a plaintiff is called a law suit. To identify: The accounting treatment. Company should record the amount as liability The damage estimated by the company M us $3500000 in a case with a high probability of losing the case. Thus company should record the amount as liability

Solution Summary: The author explains the accounting treatment of a civil activity brought in the court of law.

FINANCIAL ACCT-CONNECT

FINANCIAL ACCT-CONNECT

8th Edition

ISBN: 9781266627903

Author: Wild

Publisher: INTER MCG

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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 conting…

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Chapter 9, Problem 9QS

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FINANCIAL ACCT-CONNECT

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