A contingental liability may or maynot be liability to the company. It is mandatory to show in Balance Sheet. Ex:- Exgratia payable to Workers. Sometimes company has to pay, sometimes may not pay.
A contingent liability is a liability which a company has to show in balance sheet and if that liability doesnt occur in thew future then the company need not pay.
Contingent Liability is a liability which may or may not occur, but it should be shown in the Notes to Accounts. It will not be a part of Balance Sheet. we can say Disputed Liability of the co.,
Contingent liability may be a liability or not will be decided by the future actions of the organisation. that means future actions will decide an activity as liability or not for example : if the government policy regarding taxation is pending, the trader is not in a position to decide the exact amount of tax. In this case the trader will decide the total liability of tax after the decision is finalised.
Absence of Forsa majoriea is one of the condition which may lead to contigent liability for a company.
its nothing but a treatment given to the balance sheet in order to nullify the effect of certain type of liabilty which originate which has not been supposed to happen under normal functioning of the organisation.
