Under all forms of selling contracts, the selling price of lots sold is treated as an asset, and the payment due to the owner as a liability, although the liability is contingent upon the completion of the contract made with the purchaser. For this reason it is advisable to show such liabilities in the balance sheet as an item by themselves. (See Section 200, account No. 21, and Section 204, account No. 28.) The opening journal entry is of the following form:

Contracts .................................. $......

To J. Doe, Owner.................... $......

As collections come in, payments are made to J. Doe, owner, and debited to his account, the balance of which shows the remaining amount due him for properties covered by contracts. Care should be taken in drawing the balance sheet to show that this class of liability is contingent upon the contracts being completed.

Special conditions are frequently inserted in selling contracts, and it is necessary in each case that the original agreement between the owner and the agent be examined by the accountant. Such agreements form a prolific source of contention, and the greatest care should be taken to insure the proper recording of all points likely to cause misunderstanding, such as the land covered, the term of contract, the method of payment, the sharing of commissions and expenses, and the nature of any expense to be borne exclusively by either party.