A Certain Contingent Liability Was Evaluated at Year-End; the Company

question 51

True/False

A certain contingent liability was evaluated at year-end; the company felt it was probable that it would become an actual liability,and the amount could be reasonably estimated.If the accountant decided NOT to report it on the balance sheet or in the notes to the financial statement,this could be considered unethical behavior.

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Definitions:

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but is kept by the company to reinvest in its core business or to pay debt.

Liability Account

An accounting record that captures the amounts a company owes to creditors.

Creditors

Creditors are individuals or entities to whom a company owes money for goods or services that have been provided.