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

question 132

Multiple Choice

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,what effect would it have on the financial reporting of the company?

• A) There would be no effect.
• B) The liabilities on the balance sheet would be understated.
• C) The information about the transaction would be inadequately disclosed in the notes.
• D) The net income of the company would be understated.

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Definitions:

Transnational Hybrid

A business model combing elements from multiple cultural or legal frameworks, operating across national borders.

Private Sector

The part of the economy that is run by individuals and companies for profit rather than by the state.

Civil Society

The sphere of social life that is open to public participation and forms independently of the state, including organizations, movements, and clubs.

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Intangible products provided to consumers or businesses, involving human or mechanical effort.