provision and contingent liability

Accountancy

difference between provision and liabilities. can u also give one exp of Cat 1 and 2 contingent liabilities [Video Time Stamp: 05:51] Video Details ------------- Accounting - CA Foundation (New) Contingent Assets and Contingent Liabilities #3. Provisions, Current Liabilities & Contingent Liabilities

vidya Shah

CA Inter

★ 0

28-Apr-26 21:46

103

Answers (2)

Liability: You know you owe it and exactly how much. For e.g salary payable Provision: You know you owe it, but you have to estimate how much. - warranty obligations Contingent liability is a case where either 1. There is no present obligation but can be a possible obligation (court case) or 2. There is a present obligation but cannot measure the amount of obligation (we know we need to pay but are not sure of how much is the amount)

CA Suraj Lakhotia

Admin

04-May-26 11:36

Also if the probability of obligation/payment is >50% - we record it in the books as a provision. If amount cannot be measured, it is a contingent liability. If probability is upto 50%, its a contingent liability.

CA Suraj Lakhotia

Admin

04-May-26 11:37