Contingent Liabilities Are Recorded as a Liability Only If the Loss

question 19

True/False

Contingent liabilities are recorded as a liability only if the loss is considered substantial and the amount is reasonably determinable.

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Definitions:

Bad Debts

Accounts receivable that a company does not expect to collect and therefore writes off as a loss.

Allowance for Doubtful Accounts

A contra-asset account that estimates the portion of accounts receivable which may never be collected.

Collections

The process of pursuing payments of debts owed by individuals or businesses, typically involving accounts receivable teams or collection agencies.

Selling Goods on Account

The process of selling merchandise to a buyer where payment is to be made at a future date as agreed.