QUESTION 30 If a loss contingency related to a lawsuit against a firm is deemed to have a reasonable probability of requiring ultimate payment, then the proper accounting treatment of the loss contingency will     require footnote disclosure.     decrease the debt/asset ratio.     increase the accounts payable/sales ratio.     decrease the debt/equity ratio.

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Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.