Question

Under which convention of
accounting, the contingent
liabilities are shown as a
footnote or explanatory
notes in the balance sheet of
a firm?
Convention of Full Disclosure
Convention of Materiality
Convention of
Conservatism/Prudence
Convention of Consistency

Answer 1

Answer:

Convention of disclosure

Explanation:

A contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event. A contingent liability is recorded in the accounting records if the contingency is probable estimated. The principle of full disclosure requires that all material and relevant facts concerning financial performance of an enterprise must be fully and completely disclosed in the financial statements and their accompanying footnotes. Hence, contingent liability is recorded in balance sheet as footnote.

Answer 2

Answer:

convention of Materiality