Question

Exhibit 8: Accounting Treatment of Contingent Liabilities

Likelihood of Occurring Accounting Treatment Measurement Probable Estimable Record and Disclose Liability Not Estimable Disclose Liability Contingency Reasonably Possible Disclose Liability Remote None

Discuss Exhibit 8, to receive full credit include include the definitions of accrual and cash basis accounting systems, accounting for pensions and contingent liabilities, and GAAP in your answer.

Answer 1

The table what you have shown is clear and correct.

under GAAP, a contigent liability is defined as any potential future loss that depends on a "triggering event to turn into actual expenses Alturat Accrual Basis Conligent liabilities Probable more likely to consider as it occurs. possible = equal possible to occur s can be considered. Remote less likely to occur, so need not be considered. full credit ak amount is probable s can be estimated then we can take full credit otherwise to the extent it 4 probable. Cash Basis. under Cash Basid ,Question not arises in respect to contigent liabilities as Payment will be considered to record Accounting entrie Note: Howewen A foot note can be used to show exchlaining about contigent liabilities & its amount

If contigent liability can be estimated in amount can be accounted otherwise disclosed.And can be taken as full credit.

Feel free to ask any question if not fully resolved as to there is no enough clarity in question to what to answer.