Differenciate between contingent liability and provision..?

1.	Differenciate between contingent liability and provision..?
Answer» CONTINGENT liability: Contingent liabilities are liabilities that may be incurred by an entity DEPENDING on the OUTCOME of an uncertain future EVENT such as the outcome of a pending lawsuit. Provision: A provision is a liability of uncertain timing or amount. The liability may be a legal obligation or a constructive obligation. A constructive obligation arises from the entity’s actions, through which it has indicated to others that it will accept certain RESPONSIBILITIES, and as a result has created an expectation that it will discharge those responsibilities.

Answer»

CONTINGENT liability:

Contingent liabilities are liabilities that may be incurred by an entity DEPENDING on the OUTCOME of an uncertain future EVENT such as the outcome of a pending lawsuit.

Provision:

A provision is a liability of uncertain timing or amount. The liability may be a legal obligation or a constructive obligation. A constructive obligation arises from the entity’s actions, through which it has indicated to others that it will accept certain RESPONSIBILITIES, and as a result has created an expectation that it will discharge those responsibilities.

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