A contingent liability is recorded by making an appropriate journal entry if the likelihood of a loss is possible.

Name: A contingent liability is recorded by making an appropriate journal entry if the likelihood of a loss is possible.
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A contingent liability is recorded by making a journal entry only if the likelihood of a loss is probable and the amount can be reasonably estimated. If the likelihood is only possible, it is disclosed in the notes to the financial statements, not recorded.

A Contingent Liability Is Recorded by Making an Appropriate Journal