Definition: Contingent Liability refers to ananticipated financial obligationthat springs from events that happened in the past and whose existence is validated by the happening or non-happening of the uncertain
Examples of contingent liability are product warranties, penalties that may arise from government investigations whereas the example of current liabilities is the accounts payable, short-term debts of the company, etc. Disadvantages of Contingent Liabilities Disadvantages of contingent liabilities are as fol...
A contingent liability is a potential liability (and a potential loss or potential expense). For a contingent liability to become an actual liability a future event must occur. Examples of Contingent Liabilities Assume someone files a lawsuit against Jay Corp. Jay Corp now has a contingent liabili...
The following two examples should help to clarify the procedures: Example 1: A company has signed a contract to deliver machine parts at a fixed price in the following financial year. The parts are usually in stock. Price increases for raw ...
What are the criteria for classifying an item as a current liability? What are some examples of current liabilities? How do you record a deposit on a balance sheet in accounting? How do you record interest recorded but not yet paid in accounting?
When a provision (liability) is recognised, the debit entry for a provision is not always an expense. Sometimes the provision may form part of the cost of the asset. Examples: included in the cost of inventories, or an obligation for environmental cleanup when a new mine is opened or an ...
To understand provisions better, let’s break down the definition of a liability in IAS 37: A liability is a present obligation arising from past event that is expected to be settled by an outflow of economic benefits from an entity. In other words, if there is no past event, then ther...
To understand provisions better, let’s break down the definition of a liability in IAS 37: A liability is a present obligation arising from past event that is expected to be settled by an outflow of economic benefits from an entity. In other words, if there is no past event, then ther...
Workers responsible for calculating and paying their own income tax and liability insurance Hourly or day rate tends to be higher in lieu of benefits and regular hours Controls when and where they work Employees: Predictable schedule and working hours Paid a set wage or salary Usua...
All the entities in the examples have 31 December year-ends. In all cases, it is assumed that a reliable estimate can be made of any outflows expected. In some examples the circumstances described may have resulted in impairment of the assets - this aspect is not dealt with in the ...