Theoretical FrameworkQ-1 | Contingent Assets and Contingent LiabilitiesQuestion 4636 of 110
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Contingent liability. [Dec. 2021, 1 Mark]

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Detailed Solution & Explanation

Contingent liability: (a) A contingent liability is a possible obligation that arises from past events and the existence of which 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. Possible obligation - An obligation is a possible obligation if, based on the evidence available, its existence at the balance sheet date is considered not probable; or (b) A contingent liability is a present obligation that arises from past events but is not recognised because: i. it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or ii. a reliable estimate of the amount of the obligation cannot be made. It is said to be 'probable' if chances of its happening are more than not happening i.e. probability is more than half.

About This Chapter: Theoretical Framework

Paper

Paper 1: Accounting

Weightage

5-10%

Key Topics

Policies, Standards (Ind AS), Vocabulary

This chapter covers Policies, Standards (Ind AS), Vocabulary and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 5-10% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Contingent Liability

A potential liability that may occur depending on the outcome of an uncertain future event.

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