A contract liability, often discussed as deferred revenue in simple cases, records consideration associated with performance still owed. Trade receivables concern an unconditional right to payment subject only to passage of time; a contract asset can arise when a right remains conditional on something else.

Worked example: Follow the advance payment

Separate six-month service (£)
Period	Cash receipt	Revenue	Closing obligation
Month 1	£12,000	£2,000	£10,000
Month 2	£0	£2,000	£8,000
Month 6	£0	£2,000	£0

The Revenue timing workbook sheet shows all six months. Cash total and revenue total eventually both reach £12,000, but their monthly timing differs.

Deposits may have refund conditions; bundled arrangements may require price allocation; variable fees need assessment; principal-versus-agent arrangements can change whether revenue is shown gross or net. Do not assume the full invoice belongs in current revenue.

For a real contract, ask finance to confirm the obligation, entitlement, timing, and uncertainty. A convenient billing schedule cannot substitute for that judgement.

Aleph Intelligence Academy · Worked relationshipDeposits, receivables, and contract liabilities

1ReceiptCash +£12,000.
2First month deliveredRevenue £2,000.
3Remaining obligationContract liability £10,000.

Source: authored fictional teaching example. Read the connected concepts in order; apply the stated calculation and period assumptions.