Differences Between A Current Liability and A Contingent Liability With Examples

Current Liabilities are debts due that are payable by the business to outsiders within the current Accounting Period. Examples are Accounts Payable / Creditors, Trades Payable, Notes Payable, Outstanding Expenses, Unearned Revenues and any other Current Expenses Payable in the Current Accounting Period.

  

Current Liability is a present obligation and certain amount that is payable in the current specified period of time.

          You may also be interested in International Accounting Standards IAS-1

Contingent Liability 

  

It depends upon the happening of a uncertain future event that may or may not happen. It is possible obligations that depends upon future uncertain events that are uncertain and these events may happen or not. Due to such uncertain future event, then this liability will arise and the amount is determined from the past events.

  

In case of Contingent Liabilities, The Notes To The Accounts or Financial Statements should be made for the explanation of the past event to the users of Financial Statement.

  

According To IAS-37, Contingent Liabilities are:

Liabilities arised from the past events, for which the payment is probable and the mount is not reliably measurable. A Provision for Contingent Liability is only made when the amount is probably measurable and it is reliable and resulted from past events. Otherwise, Only Disclosures is made in the Notes To The Accounts Section of the Financial Reports of the company.

  

Examples of Contingent Liabilities

  

Examples are Legal Cases, Failure of Paying Debts, etc. For Example, if a company may fail to pay the debts in future period of time to Accounts Payable, then Contingent Liability is arised and it is reported on the notes to the financial statements for the explanation of the Contingent Liability.

  

In the nutshell we can say that Current Liability is a present obligation resulted from the past event and it is payable in the current accounting period and the payment is reliably measurable, whereas Contingent Liability is uncertain depending upon future uncertain event and the amount is not reliably measurable and it becomes payable or current liability when the results of uncertain event is realized clearly.