Description: A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event.
Potential lawsuits, product warranties, and pending investigation
are some examples of contingent liability.
What are the types of contingent liabilities?
There are three GAAP-specified categories of contingent liabilities:
probable, possible, and remote
.
Which of the following is not a contingent liability?
The correct answer is A.
Debts included in Sundry Debtors
, which are doubtful. The doubtful debts are certain to an extent and are not dependent on the occurrence of an uncertain event.
What are contingent liabilities in accounting?
A contingent liability is
a potential liability that may occur in the future
, such as pending lawsuits or honoring product warranties. If the liability is likely to occur and the amount can be reasonably estimated, the liability should be recorded in the accounting records of a firm.
Are contingent liabilities Current liabilities?
Contingent liabilities are classified as a current liability
if the debt obligation is reasonably expected to come due in a single operating cycle or one year
.
Which are shown under the head fixed assets?
- Vehicles such as company trucks.
- Office furniture.
- Machinery.
- Buildings.
- Land.
Under which major heading unclaimed dividend appears in the balance sheet of a company?
As per Schedule III of the Companies Act, 2013 unclaimed dividend is shown under the
head ‘Other Current Liabilities’
as ‘Unpaid Dividend’ and Provident Fund is shown under the head ‘Employee Benefits Expense’ as ‘Contribution to Provident Fund.
Where are contingent liabilities shown in balance sheet?
A contingent liability is recorded first as an expense in the Profit & Loss Account and
then on the liabilities side in the Balance sheet
.
What is an example of contingency?
Contingency means something that could happen or come up depending on other occurrences. An example of a contingency is
the unexpected need for a bandage on a hike
. The definition of a contingency is something that depends on something else in order to happen.
What is contingent asset example?
An example of a contingent asset (and its related contingent gain) is
a lawsuit filed by Company A against a competitor for infringing on Company A’s patent
. Even if it is probable (but not certain) that Company A will win the lawsuit, it is a contingent asset and a contingent gain.
What does contingent mean?
“Contingent” in any sense means “
depending on certain circumstances
.” In real estate, when a house is listed as contingent, it means that an offer has been made and accepted, but before the deal is complete, some additional criteria must be met.
What are current liabilities?
Current liabilities are a
company’s short-term financial obligations that are due within one year
or within a normal operating cycle. … Examples of current liabilities include accounts payable, short-term debt, dividends, and notes payable as well as income taxes owed.
When should contingent liabilities be disclosed?
Disclose the existence of a contingent liability in the notes accompanying the financial statements
if the liability is reasonably possible but not probable
, or if the liability is probable, but you cannot estimate the amount.
Which of the following are fixed assets?
Fixed assets can include
buildings, computer equipment, software, furniture, land, machinery, and vehicles
. For example, if a company sells produce, the delivery trucks it owns and uses are fixed assets.
Which of the following is a tangible fixed asset?
Tangible fixed assets generally refer to assets that have a physical value. Examples of this are your
business premises, equipment, inventory and machinery
.
Is unclaimed dividend a liability?
Both unpaid and unclaimed dividends are recorded as
current liabilities
on a company’s balance sheet. The current liabilities account is cleared when the unpaid and unclaimed dividends are paid.
Which dividend is shown by a bank under contingent liabilities?
Unclaimed dividends
are shown under current liability and provisions in the balance sheet of the company, since shareholder can claim these dividends any time.
Where are contingent liabilities disclosed?
Disclosing a Contingent Liability
A loss contingency that is probable or possible but the amount cannot be estimated means the amount cannot be recorded in the company’s accounts or reported as liability on the balance sheet. Instead, the contingent liability will be disclosed
in the notes to the financial statements
.
Where does unclaimed dividend appear in balance sheet?
Unclaimed dividend is shown on
the liability side of a balance sheet under the head “Reserves and Surplus”
along with capital.
When auditing contingent liabilities which of the following?
When auditing contingent liabilities, which of the following procedures would be least effective? Examining customer confirmation replies.
An estimate of when the matter will be resolved
. You just studied 20 terms!
What are contingent liabilities How are they treated?
Contingent liabilities are never recorded in the financial statements of a company. These obligations have not occurred yet but there is a possibility of them occurring in the future. So a contingent liability has no accounting treatment as such. Now such contingent liabilities
have to be reviewed on a yearly basis
.
What is contingent situation?
When an event or situation is contingent, it means that
it depends on some other event or fact
. For example, sometimes buying a new house has to be contingent upon someone else buying your old house first. That way you don’t end up owning two houses!
What are contingent actions?
Contingency action are
actions taken in the event of a disruption
, mitigation actions are actions taken in advance of a disruption.
How do I find contingencies?
The easiest way to do this is to
multiply the probability percentage by your estimated cost impact
, providing a risk contingency for each line item. For example, a risk probability of 20% multiplied by a cost impact of $40,000 equals a risk contingency of $8,000.
What are contingent liabilities Class 11?
Contingent liabilities are defined as
those potential liabilities that may occur in a future date as a result of an uncertain event
which is beyond the control of the business.
What is contingent asset in auditing?
A contingent asset is
a possible asset that may arise because of a gain that is contingent on future events that are not under an entity’s control
. According to the accounting standards, a business does not recognize a contingent asset even if the associated contingent gain is probable.
What does contingent mean in insurance?
A contingent beneficiary is a
person alternatively named to receive the benefits in a will or trust
. … In insurance contracts, a contingent beneficiary is one who benefits when the prior beneficiary of the policy is unable receive the benefit.
What is active contingent?
Active contingent is one of the many status updates given to a property listing. If a property has an active contingent status, it means
the seller has accepted an offer from a buyer
. However, the home sale isn’t finalized yet because certain contingencies need to be met.
What are quick liabilities?
Quick Liabilities =
All Current Liabilities – Bank Overdraft – Cash Credit
. The ideal quick ratio is considered to be 1:1, so that the firm is able to pay off all quick assets with no liquidity problems, i.e. without selling fixed assets or investments.
Are contingent liabilities disclosed?
A contingent liability is not recognised in the statement of financial position. However, unless the possibility of an outflow of economic resources is remote, a contingent liability
is disclosed in the notes
.
What’s a contingent offer?
A contingent offer is
made by a prospective home buyer to a seller with conditions attached that must be met before the sale can be completed
. If the criteria is not met, buyers are entitled to a refund of their earnest money. … The contract will include responsibilities for both the buyer and the seller.
Why are contingent liabilities considered unique and different from all other liabilities?
Why are contingent liabilities considered unique and different from all other liabilities?
Whether or not a company has an obligation depends on the result of a future event
. Which of the following liabilities can be classified as either current or long term?
What are long term liabilities examples?
Examples of long-term liabilities are
bonds payable, long-term loans, capital leases
, pension liabilities, post-retirement healthcare liabilities, deferred compensation, deferred revenues, deferred income taxes, and derivative liabilities.
Which of the following are fixed assets quizlet?
Fixed Assets include
land, land improvements, buildings, and equipment (machinery, furniture, tools)
. Major characteristics: – Typically referred to as Plant Assets or Property, Plant, and Equipment. You just studied 34 terms!
