Question

difference between provision and contingent liability​

Answer 1

contingent liability is a probable future cash outflow from any activity. ... The provision is charged to profit and loss statement and shown in the balance sheet whereas contingent liability is shown in the footnotes at the end of balance sheet.

Answer 2

A contingent liability is a probable future cash outflow from any activity. The amount of outflow can be estimated but the possibility of the outflow is very less. Like a civil suit, the damages payable can be somewhat estimated but you're not always sure that you will lose the case.

On the other hand, a provision is something that provides for decline in an asset's value such as provision for bad debts or provision for reduction in value. The value can be more realistically estimated as compared to contingent liability.

The provision is charged to profit and loss statement and shown in the balance sheet whereas contingent liability is shown in the footnotes at the end of balance sheet.

Hope it helps you

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¶¶Deepika¶¶