A contingent liability is recorded in the accounting records
A) if a reasonable estimate of the expected loss can be determined and if it is probable.
B) if the contingency has not already been disclosed in the notes to the ﬁnancial statements.
C) if it will possibly become an actual liability, and the exact amount is unknown.
D) under no circumstances.

Question

Quizplus · Accepted Answer

A contingent liability is recorded in the accounting records if it is probable that a loss will occur and the amount of the loss can be reasonably estimated. This follows accounting principles that require recognition of liabilities when they are likely to occur and can be quantified.

A Contingent Liability Is Recorded in the Accounting Records