What does contingent liability mean in accountancy? It comes inside balance sheet-true or false??

A contingent liability is not a balance sheet item. Such a liability would be where the company attorney thinks that someone will sue the company and the company is liable for some amount but it is unknown at the balance sheet date. Such a liability would be disclosed in the footnotes to the financial statement but not booked on the balance sheet. Another way to look at would be that it is an asserted claim but not an actual claim. The expense for a warranty program can be determined based on company history and an estimate of the fut re cost can be booked on the balance sheetWhat does contingent liability mean in accountancy? It comes inside balance sheet-true or false??
A contingent liability means that something has to happen in order for the liability to occur. For example, Accrued Warranty Expense is a contingent liability. A company sells a product with a warranty. In order for a liability to occur, the person that purchased the product must make a claim under the warranty. However, based upon prior experience, the company is able to reasonably estimate that a certain percentage of the purchasers will make a claim, and that each claim will cost the company X dollars. Accordingly, the company sets up a contingent liability on its balance sheet for the estimated amount (Debit Warranty Expense, Credit Accrued Warranty).





For tax purposes, this expense may or may not be deductible, depending on other facts.