Contingent Liabilities and their Accounting treatment?

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Accepted Answer

Contingent liabilities are potential liabilities that may arise in the future based on certain events. They are disclosed in the financial statements.

Contingent liabilities are not recognized in the financial statements but are disclosed in the notes to the financial statements.
They are potential obligations that depend on the outcome of future events, such as lawsuits, warranties, or guarantees.
If the likelihood of the contingent liability is probable and the amount can be reasonably estimated, it should be recorded in the financial statements.
If the likelihood is only possible or remote, the contingent liability is disclosed in the notes to the financial statements.
Examples include pending lawsuits, product warranties, and guarantees on loans.
Disclosure of contingent liabilities is important for stakeholders to assess the financial health and risk exposure of a company.

Contingent Liabilities and their Accounting treatment?

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