If a Liability Is Dependent on a Future Event It

question 23

Multiple Choice

If a liability is dependent on a future event it is called a

• A) potential liability.
• B) hypothetical liability.
• C) probabilistic liability.
• D) contingent liability.

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Definitions:

Outstanding Checks

Outstanding checks refer to checks that have been written and recorded in the paying entity's ledger but not yet cashed or cleared by the recipient.

Checks Cleared

The process where bank checks are verified and funds are transferred from the check writer's account to the recipient's account.

Checks Written

Financial documents that instruct a bank to pay the specified amount from the drawer's account to the person or entity named on the check.

Deposits In Transit

Funds that have been sent to a bank but not yet recorded by the bank in the company’s account balance.