Question

Explain the following:

Income received in advance


Is an expense which was paid during a certain reporting period, but which relates to a future period.

An expense which relates to a certain reporting period but which is still unpaid at the end of that reporting period.


An income prepaid is revenue received during a ceratin reporting period but which relates to a future period.


A revenue which relates to a fixed reporting period, but is still to be received at the end of the reporting period concerned.

Answer 1

[AI-generated answer — Bot GPT 3.5]

Income received in advance refers to revenue that is received by a company before it has been earned. This may occur when a customer pays for a product or service in advance of actually receiving it. In accounting terms, income received in advance is recorded as a liability on the balance sheet until it is earned. Once the revenue is earned, the liability is reduced and the income is recognized as revenue on the income statement. This ensures that revenue is properly matched with the expenses incurred to generate it in a particular reporting period.