The journal entry to record a contingent liability requires a debit to a loss (or expense)account and a credit to a liability.

Question

Quizplus · Accepted Answer

This is correct. A contingent liability refers to a potential obligation that may arise depending on the outcome of a future event, such as a lawsuit or product warranty claim. To record this liability in the accounting records, a company would debit a loss (or expense) account to reflect the potential cost of the contingency, and credit a liability account to reflect the obligation that may arise.

The Journal Entry to Record a Contingent Liability Requires a Debit