Advance Payment

A Advance Payment is a predetermined payment.

• AKA: Advance, Prepaid Expense.
• See: Accrual Accounting, Signing Bonus.

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References

2016

• (Wikipedia, 2016) ⇒ http://en.wikipedia.org/wiki/ Retrieved 2016-11-11
  • 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.

• CDER Library v1.5.1.
  • QUOTE: Advance payment means a payment that a Federal awarding agency or pass-through entity makes by any appropriate payment mechanism, including a predetermined payment schedule, before the non-Federal entity disburses the funds for program purposes.

• (UOregon, 2016) ⇒ http://ba.uoregon.edu/content/prepaid-expense
  • QUOTE: According to Generally Accepted Accounting Principles (GAAP), accrual accounting requires expenditures to be charged to the fiscal year and period in which goods are received or services are performed, regardless of when budget or cash is available.

     Expenses for future periods or fiscal years should be coded to the appropriate prepaid expense account code. To remove the prepaid and recognize the expense, post a reversing journal voucher with a transaction date in the fiscal year and period that the goods or services are to be provided. This journal voucher may be processed ahead of time if the future period is open.

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