Final answer:
To account for a reasonably possible loss contingency with a known or estimable amount of loss, a company should record it as a liability on the balance sheet and disclose the amount in the footnotes of the financial statements.
Step-by-step explanation:
To account for a loss contingency that is reasonably possible and the amount of loss is known or reasonably estimable, a company should follow the guidelines set forth by the Generally Accepted Accounting Principles (GAAP). In this case, the company should record the loss contingency as a liability on its balance sheet. The amount of the loss should be estimated and disclosed in the footnotes of the financial statements. Additionally, if the likelihood of the loss contingency is remote, the company should disclose the nature of the contingency but is not required to record it as a liability.