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. Advance payments are recorded as a
prepaid expense in ''
accrual accounting
Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investments over a period of time.
Accruals in accounting
For example, a company delivers a product to a customer who will pay for it 30 days l ...
'' 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
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Advance against royalties
*
Chicago Options Associates
*
Pay or play contract
*
Prepaid expense
*
Signing bonus
A signing bonus or sign-on bonus is a sum of money paid to a new employee (including a professional sports person) by a company as an incentive to join that company. They are often given as a way of making a compensation package more attractive ...
External links
Dictionary of Small Business definition: "advance payment"UC Advance Payment
Expense
Asset
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