CONTINGENT LIABILITY Definition

Bookmark and Share

CONTINGENT LIABILITY is: (a) A possible obligation from past events that will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise; or (b) A present obligation from past events but is not recognized because (i) it is not probable that an outflow of resources will be required to settle the obligation; or (ii) the obligation cannot be measured reliably. Some examples: in corporate reports are pending lawsuits, judgments under appeal, disputed claims, and the like, representing potential financial liability.

Learn new Accounting Terms

ACCOUNTING CYCLE is the sequence of steps in preparing the financial statements for a given period. It refers to the fact that because financial reports are given each period (usually a year) there are a set of steps (cycle) taken each period that result in the reports and preparation for the next period or cycle. The term cycle is used because every period there is a start and an end. The cycle usually starts with the budget, goes through the journal entries, adjusting entries, posting to the accounts, financial reports, and closings.

SALES TAX is a tax levied by a government entity, usually state or city, on the retail price of an item and certain taxable services, collected by the retailer.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.