Excise Footnote Settlement For Free

The income statement shows a company's expense, income, gains, and losses, which can be put into a mathematical equation to arrive at the net profit or loss for that time period. This information helps you make timely decisions to make sure that your business is on a good financial footing.

Footnote disclosures describe how the numbers in the statement of financial position, statement of activities and cash flow statements were determined and provide a sense of where the organization is going. Financial statements are required to provide full disclosure, including future contingencies and commitments.

Qualifying contingent liabilities are recorded as an expense on the income statement and a liability on the balance sheet. If the contingent loss is remote, meaning it has less than a 50% chance of occurring, the liability should not be reflected on the balance sheet.

If a business has hired an auditor to conduct an audit of its financial statements, that person will conduct just as thorough an investigation of the footnotes as of the financial statements, and will base his or her opinion of the financial statements partially on the information contained within the footnotes.

Disclose a loss contingency arising from a claim when it is reasonably possible a loss will eventually be incurred and the loss is either not probable or not subject to reasonable estimation. In the disclosure, indicate the nature of the contingency and give an estimate of the possible loss or range of loss.

Since the precise amount of a potential gain from a gain contingency is unknown, it is not recorded in accounting. However, it may be disclosed in the notes of a financial statement if the amount of gain is expected to be significant.

You list it as a liability on the balance sheet and a loss contingency on the income statement. It's possible but not probable you'll lose money. You disclose it in the notes on the financial statement, but you don't include the amount in your statements.