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contingent liability

Aparnaa (Student ) (349 Points)

17 September 2008

whats the accounting treatment for contingent liability on bills receivable discounted?

what does it mean?

is contingent liability is accounted as liabilty and disclosed in Balance sheet as foot note?

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6 Replies

Vijay (CA) (254 Points)
Replied 17 September 2008

HI Dear,

Contingent liability is not a real liability. Thats why it is not shown in balance sheet. It is just disclosed as contingent liability as a Notes on Accounts.

CA. Vijay Sharma

(Guest)

hi,

Contingent Liabilities is nothing but not a actual liability of company on B/S date, it may or may not arise in future, because of this we have to disclose under B/S as Footnote as per company law.

Aparnaa (Student ) (349 Points)
Replied 18 September 2008

hi thanks.. how is it treated on it becoming an actual liability say in case of bills receivable discounted?

is it to be adjusted against Debtors or bills receivable?

What are the flow of entries for this?

sangeetha (PCC student) (84 Points)
Replied 18 September 2008

Hi,

When you have already Discounted the bill How can the actual liability affect the B/R acc?? cuz you already cancelled it while discounting. When actuall default occurs the bank will automatically debit your account. So your

contingent Liability will be lifted and your Debtors(increase) and Bank balance (decrease) will be affected.

(Guest)

Hi All,

Contingent Liability is a potential liability to the company. It becomes actual liability only in case if it happens. Thats why it shown in Balance sheet. as Foot note.

For Example:- Company sells its product to the customer saying that it will replace the product if it becomes defective. If no product have become defective then its not actual liability to the company. Thats why contingent liability is shown in Balance as Foot note.

K SIVARAMAN (ACCOUNTANT) (28 Points)
Replied 19 September 2008

Sir

Can the pre-construction period interest in housing loan be claimed fully in the previos year of acquisition of property subject to the limit of Rs.150000/- for self-occupied and unlimited for let-out property