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A contingency was evaluated at year-end and considered to have a remote possibility of becoming an actual liability. If this was not reported on the balance sheet or in the notes to the financial statements, what effect would this have on the financial reporting of the company?
a. the net income of the company would be understatedb. there would be no effectc. the information about the transaction would be inadequately disclosed in the notesd. the liabilities on the balance sheet would be understated.

Respuesta :

Answer: There would be no effect

Explanation:

A company only report reasonably possible in the footnotes and Probable and estimated in the financial statements

The correct answer is (b) there would be no effect.

What are the financial statements?

Financial statements are documents that describe a company's operations and financial performance. Government organizations, accounting companies, etc. frequently audit financial statements to guarantee accuracy and for tax, financing, or investing purposes.

Financial statements are official records of a person, business, or other entity's financial situation and actions. An easy-to-understand format is used to provide pertinent financial data in a systematic manner.

Learn more about financial statements here

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