Which of the following statements best describes a contingent liability?
A. A contingent liability will only be incurred if a particular future event takes place.
B. A contingent liability is a potential liability that will be incurred if a natural disaster happens.
C. The amount of a contingent liability is known and will definitely have to be paid in the future.
D. A contingent liability is a potential liability that has arisen because of a past transaction or event, but its ultimate outcome will not be known until a future event occurs or fails to occur.
Answer: D
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