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Legal Liabilities refer to the legal obligations and debts a business entity incurs due to its actions, whether intentional or unintentional. It encompasses financial responsibilities arising from breaches of law, regulations, contracts, or torts. Accounting principles guide the recognition, measurement, and disclosure of these liabilities on a company's balance sheet. External audits serve as checks to ensure compliance with relevant laws and regulations, including those governing legal liabilities. In essence, Legal Liabilities represent potential financial consequences businesses face for failing to meet their legal obligations.