What is a "contingent liability"?

A A definite liability

B A potential obligation that depends on a future event

C Accounts payable

D Depreciation expense

✓ Correct Answer: Option B

A contingent liability is a potential obligation whose outcome depends on uncertain future events (e.g., pending lawsuits).

💡 Why is B) the correct answer?

The correct answer to the question "What is a "contingent liability"?" is Option B: A potential obligation that depends on a future event.

The other options — A) A definite liability, C) Accounts payable, D) Depreciation expense — are incorrect for this CPA Exam Prep question. As explained above: A contingent liability is a potential obligation whose outcome depends on uncertain future events (e.g., pending lawsuits).

📚 About This CPA Exam Prep Practice Question

This 2-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

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What is a "contingent liability"?

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

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