Final answer:
Contingent liabilities should be recorded if they are probable and the amount can be reasonably estimated. Documentary symptoms include potential legal claims, future product warranties, and pending litigation but do not typically involve actual obligations, which are certain liabilities.
Step-by-step explanation:
The question concerns the recording of contingent liabilities, which are potential obligations that may become actual liabilities depending on the outcome of future events. The documentary symptoms of contingent liabilities that should be recorded include:
- Potential legal claims: These may arise from disputes, lawsuits, or possible breaches of contract.
- Future product warranties: These are promises made to customers to repair or replace defective products and represent a liability for the company.
- Pending litigation: If a company is facing a lawsuit, there should be a record of the potential liability that could result if the case is lost.
It's important to note that while actual obligations are definite liabilities and must be recorded on the financial statements, contingent liabilities are only recorded if the obligation is probable and the amount can be reasonably estimated. An assessment must be done to determine whether these potential obligations meet the criteria for recording in the financial statements.