WK7DQ1 ACC.docx - \u201cLiabilities are legally binding obligations that are payable to another person or entity(Bragg 2020)\u201d In simple words it is the

WK7DQ1 ACC.docx - “Liabilities are legally binding...

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“Liabilities are legally binding obligations that are payable to another person or entity (Bragg, 2020)”. In simple words it is the company's financial debt. Some economic benefits can settle liabilities such as accounts money, goods or services. Liabilities are recorded on the left side of the balance sheet. Whether the liability should be reported or not depends on the past events and projected outflow measurements. There are two types of liabilities. They are current and noncurrent. The company cannot report the probable loss as liability in the balance sheet if the company has the facility placed in the disastrous weather. The future estimate cannot be reported as a liabilities in balance sheet. The past events are only reordered in balance sheet. There are some contingent liability such as product warranty, guarantees on debts, liquidated damages
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Unformatted text preview: outstanding lawsuits and government probes. Those types of contingent liabilities are recorded in balance sheet as they can be estimated with reasonable level of the accuracy. Those contingent liability are also required by GAAP and FIRS. Other than that the contingent liability like weather disaster are not recorded in the balance sheet. As the final loss of the company caused by the disaster is impossible to define. Therefore, the company cannot report the probable loss as liability in the balance sheet. References Bragg, S. (2020, february 4). Liabilities definition . Retrieved from Accounting tools: ...
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