A Certain Contingent Liability Was Evaluated at Year-End,and Considered to Have

question 38

Multiple Choice

A certain contingent liability was evaluated at year-end,and considered to have a reasonable possibility of becoming an actual liability.If the accountant decided NOT to report it on the balance sheet or in the notes to the financial statement,what effect would this have on the financial reporting of the company?

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

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Definitions:

Parkinson

A degenerative disorder of the central nervous system that primarily affects motor function, often characterized by tremors, stiffness, and slow movement.

Controversial

Pertaining to or causing disagreement, debate, or argumentation due to differing opinions or ideas.

Neuroplasticity

The nervous system’s potential to physically or chemically modify itself in response to environmental change and to compensate for age-related changes and injury.

Simple Animals

Refers to organisms in the animal kingdom that have a relatively simple and basic body structure and systems, often lacking complex organs.