A basic difference between Contingent Liabilities and "real" liabilities is:
A) Liabilities stem from past transactions; Contingent Liabilities stem from future events.
B) Liabilities always are recorded in the accounting records, whereas Contingent Liabilities never are.
C) The extent of uncertainty involved.
D) Liabilities can be large in amount, whereas Contingent Liabilities are immaterial.

Question

Quizplus · Accepted Answer

The basic difference between Contingent Liabilities and "real" liabilities is the extent of uncertainty involved. Contingent Liabilities arise from possible future events, which may or may not happen. On the other hand, "real" liabilities result from past transactions that have already taken place and are known to exist. While Contingent Liabilities may or may not materialize in the future, "real" liabilities are already existing and must be settled. Therefore, the extent of uncertainty differentiates Contingent Liabilities from "real" liabilities.

A Basic Difference Between Contingent Liabilities and "Real" Liabilities Is