Which of the following is true of a contingent liability?
In the world of finance and accounting, understanding the nuances of different financial terms is crucial. One such term is “contingent liability,” which often confuses many individuals. This article aims to shed light on what a contingent liability is, its characteristics, and how it affects financial statements.
A contingent liability is a potential obligation that may or may not occur in the future, depending on the outcome of an uncertain event. It is a liability that is not yet certain but could become an actual liability if certain conditions are met. To help clarify this concept, let’s explore the characteristics of a contingent liability and how it is reported in financial statements.
