If a business knows that a liability exists but does not know the exact amount,the business must estimate the amount of the liability and report it on the balance sheet.

Question

Quizplus · Accepted Answer

According to accounting principles, if a liability exists but the exact amount is not known, the business must estimate the amount and report it on the balance sheet. This is known as a contingent liability, and it must be disclosed in the notes to the financial statements.

If a Business Knows That a Liability Exists but Does