What is the journal entry to record a gain contingency in the financial statements?
There is no journal entry to record a gain contingency because a gain contingency is not recorded in the financial statements. The main reason for this is because it prevents companies from recording gain contingencies to temporarily inflate the financial results.
Gain contingencies should be disclosed in the notes to the financial statements if it not misleading. Otherwise, potential gains should only be recorded to the financial statements when the activity can be recognized (i.e. the company wins the lawsuit).
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