Asked by Ysobelle Eustaquio on May 01, 2024
Verified
Disclosure of a contingent liability is usually made
A) parenthetically in the body of the balance sheet.
B) parenthetically in the body of the income statement.
C) in a note to the financial statements.
D) in the management discussion section of the financial statement.
Contingent Liability
Contingent liability is a potential financial obligation that may arise in the future, dependent on the outcome of a specific event.
Financial Statements
Structured reports that convey the financial activities and condition of a business or individual, including balance sheets, income statements, and statements of cash flows.
- Acquire knowledge of the accounting and reporting prerequisites for contingent and estimated liabilities.
Verified Answer
ND
Nidhi DesaiMay 08, 2024
Final Answer :
C
Explanation :
Disclosure of a contingent liability is usually made in a note to the financial statements. Contingent liabilities are potential liabilities that arise from past events, but their existence is uncertain and depends on the occurrence or non-occurrence of one or more future events. Examples of contingent liabilities include pending lawsuits or product warranties. To provide full and fair disclosure, companies should disclose any material contingent liabilities in the notes to their financial statements.
Learning Objectives
- Acquire knowledge of the accounting and reporting prerequisites for contingent and estimated liabilities.