[ QUESTION ] [ AND ] [ ANSWERS ] [ ON ] [ CONTINGENT ] [ LIABILITY ]

WHAT IS CONTINGENT LIABILITY?

- Obligation that may possibly ( take it as 50% likelihood of occurring ) arise from past events not fully controllable by the business.
- A present Obligation that may or may not occur that is why it is not be recognized as a liability.
- An unsure but potential liability.

WHY CONTINGENT LIABILITY IS NOT RECOGNIZED?

- Business cannot determine any future monetary benefits.
- Not reliably information to categorize it as Contingent Liability.

SHOULD THE CONTINGENT LIABILITY DISCLOSED IN FINANCIAL STATEMENTS?

- Yes, they should be disclosed as business sees any probability of it occuring.

SHOULD THE CONTINGENT LIABILITY DISCLOSED IN FINANCIAL STATEMENTS WHEN THE OUTCOME SEEMS NOT PROBABLE?

- No, you should have guessed. And it's right. No need to disclose when business knows it won't happen in a million years ( business analysts and accountants seems sure ).

HOW CONTINGENT LIABILITY SHOULD BE DISCLOSED IN FINANCIAL STATEMENTS?

- By writing notes in Financial Statements. It is not disclosed on the face of SFP - Statement of Financial Position

IF A COMPANY " A " SUES ANOTHER COMPANY " B " IS THE AMOUNT STILL TO BE INCURRED CONTINGENT LIABILITY ?

- Yes, as Company " A " sees the probability of sue case taken up in the court or settling by meeting - Business sees some money exchange between parties. And if the company is found to be guilty then it's no more a Contingent Liability but a Current Liability.


Hopefully, these have cleared your concepts on Liability and mine too. Still have to appear for the paper. Do pray for me.

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<a href="http://studyaccounting.blogspot.com/2009/05/QUESTION-AND-ANSWERS-ON-CONTINGENT.html">[ QUESTION ] [ AND ] [ ANSWERS ] [ ON ] [ CONTINGENT ] [ LIABILITY ]</a>

[ REFERENCES ]

wisegeek.com/what-is-a-contingent-liability.htm
financial-dictionary.thefreedictionary.com/contingency
en.wikipedia.org/wiki/Contingent_Liabilities
scotland.gov.uk/Topics/Government/Finance/spfm/contingentliabs
blog.accountingcoach.com/contingent-liability
investopedia.com/terms/c/contingentliability.asp
citefin.com/333-contingent-liability.html
businessdictionary.com/definition/contingent-liability.html
geekinterview.com/question_details/22180

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