Question

what should be recorded in the books of the company and what are its implications?

31, 2017. Production Accident In October 2017, TOI found out that one of the air tubes used in its barbecues was incorrectly made. As a result, several customers throughout Western Canada and the Northeastern United States became ill or were injured. There is currently a lawsuit pending that may result in claims being paid out. When your partner asked Danica about insurance, she stated that she had downgraded the insurance this year, saving

Answer 1

I am assuming that TOI is a private limited company and not a public limited company. Thus the financial statements do not go to the public. So TOI may think of making provision in the books based on probability. The likely claim amount = 5% * 0 + 25% * 200000 + 50% * 500000 + 20% * 700000 = 440000. The company may provide for the claim in his books or show the same as contingent liability. In case of public limited company, the company should show the same as contingent liability and may not provide as providing the claim in books may be looked as accepting defeat by the public.