Journal Entry for Contingent Liability

Journal Entry for Contingent Liability

Contingent liability is recognized by the following entry. The loss is debited and the contingent liability is credited in the books of accounts. It is important to remember that only certain or probable liability is recognized, where the possible contingent liability is only disclosed in the financial statement.

Date	Particulars	Dr.	Cr.
	Damages (P&L)	$ xxx
	Provision for Damages		$ xxx

 

Contingent liability Journal Entry Example

Confirmed damages of amounting $ 2 million would be recorded as under

Date	Particulars	Dr.	Cr.
	Damages (P&L)	$ 2,000,000
	Provision for Damages		$ 2,000,000