Question

Contingent liabilities should be recorded in the accounts when ________________.

• A. It is probable that the future event will occur
• B. The amount of the liability can be reasonably estimated
• C. Both A and B
• D. Either A or B

Answer 1

Answer: (C)

Both A and B

Contingent liability is an estimated liability which may arise due to a future event or incident. The contingent liability to be shown in the notes to account. It should be recorded only when it is based on a probable future event and the amount can reasonably estimated.