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Distinction Between Liability and Contingent Liability

Basis

Liability

Contingent Liability

Definition

A liability is a present obligation which arises from past events

A contingent liability is a future obligation which may arise from past events

Measurement

A liability can be measured with sufficient reliability

A contingent liability cannot be measured with sufficient reliability

Part of Balance Sheet

A liability is disclosed on the Liability side of the Balance Sheet and hence, it is a part of the Balance Sheet

A contingent liability is not a part of the Balance Sheet. It is disclosed by
way of a foot note in the
Balance Sheet





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