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Advance payment

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Title: Advance payment  
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Subject: Chicago Options Associates, Income, Financial accounting, Ways and means advances, Macmillan New Writing
Collection: Financial Accounting, Income
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Advance payment

An advance payment, or simply an advance, is the part of a contractually due sum that is paid or received in advance for goods or services, while the balance included in the invoice will only follow the delivery. It is called a prepaid expense in accrual accounting for the entity issuing the advance. Advanced payments are recorded as assets on the balance sheet. As these assets are used they are expended and recorded on the income statement for the period in which they are incurred. Insurance is a common prepaid asset, which will only be a prepaid asset because it is a proactive measure to protect business from unforeseen events.

See also

External links

  • Dictionary of Small Business definition: "advance payment"
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