Accounting Tutorial Contingent Liabilities Training Lesson 4.7 ANNOUNCER: Get your free copy of the complete tutorial at www.teachucomp.com/free. PROFESSOR: Contingent liabilities are potential liabilities that are not listed on the balance sheet. List these potential liabilities on a separate sheet or in a footnote section of the balance sheet, because they may never become due and payable. Contingent liabilities include things such as pending lawsuits, warranties, and cross guarantees for stock invested in your company. For example, if the company has been sued and litigation has not been initiated, there is no way of knowing whether or not the suit will result in a liability to the company. It's best to list it in the footnotes, because while not a real liability, it does represent a potential liability that may impair the ability of the company to meet future obligations. Another use of contingent liability is if the company guarantees a loan made by a third party to an affiliate, such as another company or employee. The liability would be considered contingent, because it may never become due as long as the affiliate meets its obligations in terms of the loan. ANNOUNCER: Like what you see? Pick up your free copy of the complete tutorial at www.teachucomp.com/free.