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Contingent Liability
  • The happening or non – happening of which
  • Depend upon
  •  The happening or non – happening


(i) Arrears of dividends on cumulative preference shares
(ii) Bills of exchange discounted
(iii) Guarantees given by the company to companies under the same management
(iv) Suit for damages against the company which it is defending
(v) Gratuities payable to staff on retirement or death
(vi) Capital commitments still to be completed



Disclosure of contingent liability


It is sufficient for the amount of contingent liability to be stated on the face of the balance sheet by way of a note, unless there is a probability that a loss will materialize and its reasonable estimate an be made. In that event, it is no more a contingent liability and a specific provision should be made therefore.

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