When can you make contingent liability? What do you understand about probable, possible and remote cases?

Question

Accepted Answer

Contingent liabilities are recognized when it is probable that a liability will occur and the amount can be reasonably estimated.

Contingent liabilities are recognized when it is probable that a liability will occur and the amount can be reasonably estimated.
Probable cases are those where the occurrence of the liability is likely based on available evidence.
Possible cases are those where the occurrence of the liability is more than remote but less than probable.
Remote cases are those where the occurrence of the liability is highly unlikely.
Examples of contingent liabilities include pending lawsuits, product warranties, and guarantees.
Disclosure of contingent liabilities is important for financial statement users to assess the potential impact on a company's financial position.

Top S.S. Kothari Mehta & Co Executive interview questions & answers