Question

For a loss contingency to be accrued,
a. it is not necessary that the lawsuit was filed before the end of the accounting period.
b. the lawsuit must have been filed before the end of the accounting period.
c. the cause of the lawsuit must have occurred before the end of the accounting period.
d. the cause of the lawsuit could have occurred before or after the end of the accounting period.

Answer 1

Answer: the cause of the lawsuit must have occurred before the end of the accounting period

Explanation:

A loss contingency is simply an expense charge for what is a future event that may occur like a lawsuit adverse outcome.

For a loss contingency to be accrued, the cause of the lawsuit must have occurred before the end of the accounting period. It should be noted that it's not important for the lawsuit to be filed in that particular reporting period.