Ask Joey ™ a Question

What are liquidating damages?

Liquidating damages are the potential damages specified as the total amount of compensation in which the aggrieved party will be able to seek, if the other party involved breaches the contract. Liquidated damages are predetermined prior to entering the contract, and for it to be legally enforceable, the nature of the contract should be such that it is difficult to determine actual damages as well as reasonably foreseeable damages should they occur.


You might also be interested in...

  • When can a PSC deduct payments made to owner-employees?

    The general rule is that personal service corporations (PSC’s) will be able to deduct owner-employee payments made in the same year that it is includible in their gross income for individual tax purposes. 

  • What do accountants mean when they say revenue can be recognized under the accrual basis of accounting?

    Under U.S. GAAP, which requires the use of accrual basis accounting, a company cannot recognize revenue until their performance obligation is satisfied. The visual below illustrates that key steps to revenue recognition:

  • What is the relationship between volume and variable cost per unit?

    If the variable cost per unit remains fixed, then any increase or decrease in unit volume will result in an increase or decrease in total variable costs for a business. For example, if variable cost per unit was steady at $5, then if unit volume were to increase from 100 to 200 units, then total […]