An advance payment, or simply an advance, is the part of a

contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tr ...

ually due sum that is paid or received in advance for goods or services, while the

balance Balance or balancing may refer to: Common meanings * Balance (ability) in biomechanics * Balance (accounting) * Balance or weighing scale * Balance as in equality or equilibrium Arts and entertainment Film * ''Balance'' (1983 film), a Bulgaria ...

included in the

invoice An invoice, bill or tab is a commercial document issued by a seller to a buyer relating to a sale transaction and indicating the products, quantities, and agreed-upon prices for products or services the seller had provided the buyer. Payment ...

will only follow the delivery. Advance payments are recorded as a

prepaid expense A deferral, in ''accrual accounting'', is any account where the income or expense is not recognised until a future date (accounting period), e.g. annuities, charges, taxes, income, etc. The deferred item may be carried, dependent on type of de ...

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.

External links

Dictionary of Small Business definition: "advance payment"UC Advance Payment
Expense Asset {{accounting-stub

See also

External links