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It is the opposite of prepaid expense
It refers to income of future period received in advance
Entries
When we Receive Advance
Bank Dr
To Party
Party Dr
To Prepaid Income
Prepaid Income Dr
To Income A/c
Example
The Company entered into contract with its client A ltd for providing technical services
As per contract,Rs 300000 was received in advance for the period Jan to March on 1 Jan
Pass Entries in books of company assuming Monthly Closing
View AnswerAdvance Money received
Bank A/c Dr 300000
To A A/c 300000
(A is Advance from Customer i.e.our Current Liability)
At the end of January
A A/c Dr 100000
To Professional Income A/c 100000
At the end of February
A A/c Dr 100000
To Professional Income A/c 100000
At the end of March
A A/c Dr 100000
To Professional Income A/c 100000
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