Contingent liability is shown in the balance sheet because of ........

Principles of Accounting & Financial Management Concepts of Accounting

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Contingent liability is shown in the balance sheet because of:

Convention of consistency

Convention of materiality

Convention of full disclosure

Convention of conservatism

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Explanation:

The Full Disclosure Principle states that all relevant and necessary information for the understanding of a company’s financial statements must be included in public company filings. For example, financial analysts who read financial statements need to know what inventory valuation method has been used, if there have been any significant write-downs, how depreciation is being calculated, and other critical information for the understanding of the financial statements.