What items are contingencies in accounting?
submitted by William Board

Les

Contingencies are possible situations that might affect a company's finances. Like, if a company might have to pay a lawsuit or if they might get a big refund, those are contingencies.

The Sparrow

Contingencies are potential liabilities or assets. They're things that could happen that would affect the company's finances. For example, if a company is sued, the outcome isn't certain yet. Maybe they'll have to pay damages, so they need to plan for that contingency.

Contingencies are usually disclosed in the notes to the financial statements. If you know an event is coming, like a big expense, you can estimate that and just put it on the books, so that's different. Contingencies aren't recorded until it's known whether it's happening or not.

__Major Tom__

Some contingencies would be:

Lawsuit liabilities - You're getting sued and might lose money.
Warranty obligations - You may have to refund some money.
Product recalls - There's something wrong with your product, and you might need to pay to make repairs.

The key here is the you MIGHT need to pay something. That's what makes it a contingency. It can go the other way though. You may have paid for work, but you could possibly get a refund. That would affect the books too, but in a good way.