Businesses must report future payment obligations in balance sheets even if exact amounts or dates are uncertain.
Is knowing the amount and due date required to report a liability in the balance sheet?
No. If an entity knows it will be obligated to pay out funds or incur costs in the future, the liability exists in principle—even if its exact value or realization date cannot yet be determined. Accounting uses mechanisms for estimating liabilities and creating provisions and accruals for interperiod cost allocations. This stems from the accrual basis, matching principle, and prudence principle. The absence of an invoice or the inability to precisely value the liability does not mean it can be omitted from the accounting records.
