The entry to accrue a contingent liability reduces equity but not income. is made if it is more likely than not that the liability has been incurred. includes a debit to a loss account. is recorded even though not reasonably estimated.

Question

Preston Greene

Business

27 August, 05:46

The entry to accrue a contingent liability reduces equity but not income. is made if it is more likely than not that the liability has been incurred. includes a debit to a loss account. is recorded even though not reasonably estimated.

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Jaslyn Sexton · Answer 1

is made if it is more likely than not that the liability has been incurred.

Explanation:

When contingent liability is recorded it is recorded by debiting income statement and creating a liability in balance sheet, also it is not accounted for until the amount of liability is pretty certain as without being clear about its occurrence and the amount involved the liability cannot be recorded.

There is no such loss account, there exists only income statement.

Therefore, with the above we can conclude that contingent liability is recorded only if:

is made if it is more likely than not that the liability has been incurred.