A charge following the date of the financial statements to a notes receivable account from the cash disbursements journal should alert auditors to the possibility that a
A) Contingent asset has come into existence following the date of the financial statements.
B) Contingent liability has come into existence following the date of the financial statements.
C) Provision for contingencies is required.
D) Contingent liability has become a real liability and has been settled.

Question

Quizplus · Accepted Answer

A charge to the notes receivable account from the cash disbursements journal indicates that a liability has been settled, suggesting that a contingent liability has become a real liability and has been paid off.

A Charge Following the Date of the Financial Statements to a Notes