Off-balance-sheet items often are called contingent assets and liabilities because they may, or may not, affect the balance sheet in the future.

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Off-balance-sheet items, such as contingent assets and liabilities, have the potential to impact the balance sheet in the future, but their actual effect remains uncertain. Therefore, they are referred to as contingent assets and liabilities.

Off-Balance-Sheet Items Often Are Called Contingent Assets and Liabilities Because