Asked by Michael Megler on Jun 10, 2024
Verified
A contingent liability is:
A) Always of a specific amount.
B) A potential obligation that depends on a future event arising from a past transaction or event.
C) An obligation not requiring future payment.
D) An obligation arising from the purchase of goods or services on credit.
E) An obligation arising from a future event.
Contingent Liability
A potential financial obligation that may occur, depending on the outcome of a future event.
Future Event
An occurrence or situation that has not yet happened but is expected or anticipated.
- Understand the standards and financial reporting practices for contingent liabilities.
Verified Answer
DM
Diara Md JadiJun 15, 2024
Final Answer :
B
Explanation :
A contingent liability is not a certain obligation, but rather a potential obligation that depends on a future event. It arises from a past transaction or event but whether it becomes an actual liability depends on the occurrence (or non-occurrence) of a future event.
Learning Objectives
- Understand the standards and financial reporting practices for contingent liabilities.