What Is contingent liability

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liabilities which is not confirm called contingent liabilities

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Aisa  liability Jo future mai ho v skta  and na v ho skta Jo uncertain ho jiska hm provision n kr site hai usko Contingent liability Kehte h

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Liability which is not certain, either it can be or it can not be. Time and amount of contingent liability is not certain

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join CA CPT Dec 2017 8109169005.

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What is Contingent Liability?
Contingent liability refers to a potential obligation that may arise depending on the outcome of a future event. It is not a definite liability but is based on uncertain circumstances. Contingent liabilities are important for financial reporting as they can impact a company's financial position.
Key Features of Contingent Liabilities:

Future Obligation: It arises from past transactions but is contingent on future events.
Uncertain Outcome: The obligation is not guaranteed and depends on the occurrence of a specific event.
Disclosure Required: Companies must disclose contingent liabilities in financial statements, although they may not be recorded on the balance sheet.

Types of Contingent Liabilities:

Probable: Likely to occur, and the amount can be reasonably estimated. These may require accrual in financial statements.
Reasonably Possible: More than remote but less than probable. These should be disclosed in the notes to financial statements.
Remote: Unlikely to occur. Typically, these do not require any disclosure.

Examples of Contingent Liabilities:

Pending Lawsuits: Legal actions where the outcome could result in a financial obligation.
Product Warranties: Commitments to repair or replace defective products.
Guarantees: Promises made by a company to cover a debt or obligation of another party.

Understanding contingent liabilities is crucial for investors and stakeholders as it provides insight into potential risks that a company may face in the future.

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