Question

When an enterprise is jointly and severally liable for an obligation, the part of the obligation that is expected to be met by other parties is treated as
A. Provision
B. Contingent asset
C. Contingent liability
D. Liability

Answer 1

Hint:
 It is an unexpected risk is an obligation that may happen contingent upon the result of a dubious future occasion. An unforeseen risk is recorded if the possibility is likely and the measure of the obligation can be sensibly assessed.

Complete answer:
A contingent liability is an unforeseen obligation is a potential risk that may happen later on. The risk might be revealed in a commentary on the budget summaries except if the two conditions are not met.

Accept that an organization is confronting a claim from an adversary firm for patent encroachment. The organization's legitimate office feels that the adversary firm has a solid case, and the business assesses a 2 million misfortune if the firm loses the case. Since the risk is both plausible and simple to appraise, the firm posts a bookkeeping passage on the accounting report to charge (increment) lawful costs for 2 million and to credit (increment) gathered cost for 2 million.

The accumulation account allows the firm to promptly post a cost without the requirement for a quick money instalment. On the off chance that the claim brings about a misfortune, a charge is applied to the gathered record (derivation) and money is credited (diminished) by $2 million.

Hence, the correct answer is option C.

Note:
 On the off chance that the risk is probably going to happen and the sum can be sensibly assessed, the obligation should be recorded in the bookkeeping records of a firm. Unforeseen liabilities are recorded to guarantee that the budget summaries are precise and meet GAAP or IFRS necessities.