USA Contingent Liabilities

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OK - not sure if this is the kind of question I can ask here. At a glance it looks like most people here are actual accountants trying to pass the cpa. I have a much more basic question. Like a sophomore question.
I am being sued and the lawyers say it is a probable that I will lose $100. So I credit an account called est. legal liabilties and I debit lawsuit expenses for $100 each.
I think I am cool so far.
Then the lawyers get us off cheap at $80 though. All examples in my acct book and t accounts that I can find on-line assume that the lawsuit was settled for an amount equal to the estimate. This is what I think I do but I am not sure:
credit cash for $80 to pay the settlement and debit legal liabilities for $80 dollars.
This leaves me with a a $20 credit balance in my liability t account and $100 debit in my expense t account. I think I should just debit the liability for $20 and credit the expense for $20.
Can I do that? Is that allowed? that seems to easy.
Thanks for any help
 

bklynboy

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You have it right. The initial liability was an estimate. When you settle for more or less you release the excess liability against the expense initially established. Its correct to true up/down these estimates against the same accounts initially recorded.
 

Samir

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Yep, I second your approach. That's what I'd do as well. Your liability was incorrect, so you corrected it.
 

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