Topic 1: ContingenciesWhen examining financial statements, a note that describes contingencies...

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Topic 1: ContingenciesWhen examining financial statements, a note that describes contingencies should be reviewed closely for possible significant liabilities that are not disclosed on the face of the balance sheet. Do you agree or disagree? Why?Topic 2: Operating IncomeHow does operating income differ from net income? How do operating assets differ from total assets? What is the advantage in removing non-operating items from the DuPont analysis?
	
Document Preview: Topic 1: ContingenciesWhen examining financial statements, a note that describes contingencies should be reviewed closely for possible significant liabilities that are not disclosed on the face of the balance sheet. Do you agree or disagree? Why?Topic 2: Operating IncomeHow does operating income differ from net income? How do operating assets differ from total assets? What is the advantage in removing non-operating items from the DuPont analysis?

Robert · Accepted Answer

Topic 1: Contingencies 
When examining financial statements, a note that describes contingencies should be reviewed 
closely for possible significant liabilities that are not disclosed on the face of the balance sheet. 
Do you agree or disagree? Why? 
Solution 
Contingencies  
It is an existing condition or situation which involves uncertainty as to the possible gain or loss 
to an enterprise and which will be resolved only when one or more future events fail to occur or 
occur. The effect of contingency depends upon future events. 
While examining the financial statements, contingent liabilities should be reviewed carefully. 
Contingencies that results in gain should not be reflected in the accounts as it violates the 
revenue recognition rule.

Topic 1: Contingencies When examining financial statements, a note that describes contingencies should be reviewed closely for possible significant liabilities that are not disclosed on the face of...

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