A contingent liability:
A) Is a liability of a specific amount.
B) Is a potential obligation that depends on a future event arising out of a past transaction.
C) Is an obligation not requiring immediate payment.
D) Is an obligation arising from the purchase of goods or services on credit.
E) None of these answers is correct.

Question

Quizplus · Accepted Answer

A contingent liability is a potential obligation that depends on a future event arising out of a past transaction. It is not a liability of a specific amount, and it may or may not require immediate payment. It is also not necessarily related to the purchase of goods or services on credit.

A Contingent Liability