Re-read what you just wrote... something OWED and NOT a liability. Just what is a liability if it is not something owed?
The contingency account is neither revenue nor an expense and would belong on the balance sheet, not the income statement. IT is a liability (credit) matched against an expense (debit). Now... revenue (credit) is matched against cash (debit); however, if it is not earned in its entirety during the period, a liability account called unearned income (another debit) is also used. Presumably, the expense which is matched against the liability (the contingency account) is accrued monthly to "build" the contigency account in case payout is required and is based upon historical claim data. The revenue is matched against the expense; hence, should be done in the same time period.
The money received is accounted for in the cash account... "revenue" and "cash" are not interchangeable. Cash is recognized when received, but revenue is recognized when EARNED.
Two totally separate scenarios. Your example above is wrong. You sell an asset and finance it, there is no income unless there is a gain... only the replacement of an asset with a receivable. You may have a gain or a loss, but not revenue. Let's assume the asset has a
5 year life and you've held it for a year:Cash 100 Accumulated Depreciation 200 Account Receivable 900 Asset 1000 Gain on sale of asset 200
However, you have given all that you will give on a specific date in this case and payment will span many dates. In the insurance case, COVERAGE spans many dates. PAYMENT is what occured on a specific date. Hence, your example is backward from the discussion at hand.
Anything OWED is always a liability... the landlord owes the tenant however many months (or the value thereof) that are left on the lease.
This would be true for personal taxes, but not for company books. You may be confusing the two.
No, in the accrual method, income is recognized when EARNED.
From Wiley's Intepretation and Application of Generally Accepted Accounting Principles:
"Under long-established GAAP, revenue, whether from the sale of product or provision of services, is to be recognized only when it has been earned.
According to SFAC 5, Recognition and Measurement in Financial Statements of Business Enterprises, (a)n entity?s revenue-earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations, and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.
In other words, in order to be recognized revenue must be realized or realizable, and it must have been earned."