Sometimes things happen during the year that might result in a future liability or gain.
How do we figure out how to record them?
There are three possibilities for liabilities:
Fortunately, figuring out what to do with potential future gains is much easier.
When it comes to figuring out which dollar amounts to use, there are a few rules:
Here are the relevant facts:
Due to an issue with a warranty policy, the firm is expecting a reasonably possible loss next year, estimates of a dollar value are impossible to make.