Contingent Losses Should Only Be Accrued If It Is Likely

question 4

True/False

Contingent losses should only be accrued if it is likely that a loss will arise due to events that existed at the date of the financial statements and the loss can be reasonably estimated.

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Definitions:

Variable Cost

Expenses that change in proportion to the activity of a business.

Desired Profit

The target profit a company sets to achieve in a specific period.

Cost Concept

A concept of accounting that determines the amount initially entered into the accounting records for purchases.

Cost-Plus Approach

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost price.