What is contingent liability in accountancy

Question

in terms of accountancy what is contingent liability and contingent asset?

Answer 1

In case of "Goodwill" its a intangible asset. For example by the name itself MNCs like Godrej,Reliance can create Goodwill ie the reputation they can create Goodwill as an asset in the Balance Sheet. Like wise the Contingent Liability is a liability likely to occur in the near future. For example if a legal case is pending in the court on any grounds viz., workmen compensation,bank guarantee, sales tax,central exercise,income tax and so on. We might have been paid some money on this expenses during heiring  but the result is pending. On completion of the above mission we may have still have to pay the balance/compensation dues to the respective authorities,

Answer 2

Hi,

Contingent means, dependent on some event. So, contingent liability is the liability is the liability, which doesn't require any outflow as of now. But if some event takes place, that liability will arise. For example, the firm is involved in a court case, wherein the firm may have to pay $1 million if it loses the case. This $1 million is the contingent liability for the firm.

Answer 3

Contingent liabilities are liabilities that may or may not be incurred by an entity depending on the outcome of a future event such as a court case. These liabilities are recorded in a company's accounts and shown in the balance sheet when both probable and reasonably estimable. A footnote to the balance sheet describes the nature and extent of the contingent liabilities. The likelihood of loss is described as probable, reasonably possible, or remote. The ability to estimate a loss is described as known, reasonably estimable, or not reasonably estimable.