In the accounting records of a defendant,lawsuits:

A) Are known liabilities.
B) Should always be recorded.
C) Should always be disclosed.
D) Should be recorded if payment for damages is probable and the amount can be reasonably estimated.
E) Should never be recorded.

Lawsuits should be recorded in the accounting records of a defendant if payment for damages is probable and the amount can be reasonably estimated. This is in accordance with the accounting principle of conservatism, which states that a company should recognize a liability when it is probable and the amount can be reasonably estimated. However, if payment for damages is not probable or the amount cannot be reasonably estimated, the lawsuit should not be recorded in the accounting records. Disclosure of lawsuits in the notes to the financial statements is also required, regardless of whether or not they are recorded in the accounting records.