A contingent liability is one for which:
A)the liability definition is not satisfied, as there is not a present obligation due to the existence of a contingency the outcome of which is not wholly within the company's control
B)the company does not presently have sufficient liquid resources to discharge
C)the liability definition is satisfied but not the liability recognition criteria.
D)Both A and C but not B

Question

Quizplus · Accepted Answer

A contingent liability is one where the liability definition is satisfied, but the recognition criteria are not met due to the presence of a contingency. The outcome of the contingency may or may not result in an actual liability, and therefore, the recognition of the liability depends on the likelihood of the contingency materializing. If the contingency is probable and the amount can be reliably estimated, the liability is recognized. If not, it is only disclosed in the financial statements as a contingent liability. Therefore, both options A and C are correct, while option B is not related to the definition of a contingent liability.

A Contingent Liability Is One for Which