You know that you will have some product liability because of a lawsuit but you are uncertain as to the amount, the persons to whom monies will be paid, or the exact time when monies will be paid. What entry, if any, should you record in the accounting records? No journal entry, but you would provide an explanation in the notes to the financial statements to acknowledge the existence of the legal action. A journal entry to a liability account and a specific dollar amount shown in the financial statements. No journal entry, but you would need to release a public statement to the news media. No news is good news. Therefore, you would not make any mention of legal matters in either the accounting records or the financial statements. No journal entry, but you would provide an explanation in the notes to the financial statements to indicate the amount and likelihood of a settlement