Question

A contingent liability is an existing situation that might result in a loss depending on the outcome of a future event. True or False

Answer 1

True

Step-by-step explanation:

A contingent liability is a liability that be loss depending on an event that will happen in the future such as pending lawsuits or honoring product warranty and pending investigation. Since the contingent liability is likely to occur, the amount of loss can be estimated and then recorded in the accounting records of the business or firm. They are recorded as an expense on the income statement and a liability on the balance sheet.