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 the correct accounting treatment for recording a contingent liability. Debiting a loss or expense account recognizes the potential future expense and crediting a liability account reflects the obligation to pay the contingent liability if it becomes an actual liability.

The Journal Entry to Record a Contingent Liability Requires a Debit