Advance Payment to Suppliers: Benefits, Risks, and Best Practices
Summary of Advance Payment to Suppliers: Benefits, Risks, and Best PracticesHow to account for advance payments?What type of account is an advance payment?What is the journal entry for advance?What type of account is advance payment for equipment?Search Results
AI Overview
AI Overview
Advance payments are accounted for by
initially recording them as a liability (unearned revenue) upon receipt, rather than as revenue, because the goods or services have not yet been delivered. When the work is completed, the liability is reduced, and revenue is recognized. Key entries include debiting cash/bank and crediting a liability account like "Customer Deposits" or "Unearned Revenue".
Accounting Process for Advance Payments Received (Seller Perspective):
Receipt of Payment: Debit Cash/Bank (Asset inc...