Is receiving income in advance a good thing???.....Accounting Adjustment (Income received in Advance)
Why would receiving income in advance be a bad thing??? Well, if we receive income in advance, we have not earned that income. Income that is received but not earned then meets the definition of a Liability. There is an obligation to either pay back the money received or to render a service or to provide a product. Until the income has been earned, it should not be recognised as income because there is a present obligation that exists. Here is the next video in the Accounting for Non-Accountants video series explaining exactly what "Income received in Advance" is. This video series is a really useful resource for helping you to better understand various basic accounting concepts if you don’t have a background in accounting.
A principle-based approach is best for learning and applying accounting.
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