Which one of the following is a required condition for a contingent liability to exist?
A) There is a potential liability to an employee of the client.
B) The amount of the future payment is known.
C) The liability resulted from an existing condition.
D) The outcome has been resolved by a current event.

Question

Quizplus · Accepted Answer

A contingent liability can only exist if it arises from an existing condition that is uncertain and will be resolved by a future event. Option A may represent a potential liability, but it is not necessarily a contingent liability. Option B is incorrect because the amount of the future payment is unknown and is part of the uncertainty that characterizes a contingent liability. Option D is incorrect because a contingent liability is, by definition, uncertain and unresolved by a current event.

Which One of the Following Is a Required Condition for a Contingent