A Contingent Liability

question 61

Multiple Choice

A contingent liability:

• A) Is always of a specific amount.
• B) Is a potential obligation that depends on a future event arising from a past transaction or event.
• C) Is an obligation not requiring future payment.
• D) Is an obligation arising from the purchase of goods or services on credit.
• E) Is an obligation arising from a future event.

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Definitions:

Perverse Incentive

A perverse incentive is an incentive that has an unintended and undesirable result that is contrary to the interests of the incentive makers.

Budget-gaming Problem

A situation in budgeting where individuals or departments manipulate figures or withhold information to secure budgetary advantages.

Compensation Schedule

A structured plan that outlines the timing and amounts of payments for work performed, damages, or other compensations.

Straight Line Pay

A compensation plan where employees are paid a fixed salary or wage that does not vary based on performance or sales.