[sierranr]

How do I journalize a legal contingency?

[ROLCAM]

There is no way of journalising a contingency.

Contingencies are best portrayed as special notes to the Balance Sheet.

[sierranr]

If there is a possibility of losing like a lawsuit though, you have to record it in your financials and then in your footnotes as well.

[morgaine300]

That may be one of those areas where the U.S. rules are different, because here we do journalize certain continguencies.

It's based on the chances of it happening, and on whether you can make a reasonable estimate of it.

If this is something you know you're supposed to be journalizing, the entry is no different than any other liability -- you're debiting an expense and crediting the liability. Whatever you want to call those accounts is fine, as long as the name is appropriate to the situation, and you'd want to keep the liability separated out.

Do you know you need to journalize it, or are you questioning that also? If so, we really need to know where you're at.