Journal Entry for Income Received in Advance
Also known as unearned income, this is income which has been received in advance. The income belongs to a future accounting period (generally the next one); however, the payment is received in the current accounting period.
This type of income received in advance acts like a liability for the business and according to the rules “credit the increase in liability” and “debit the decrease in income” (modern approach).
Journal entry for income received in advance will be
|To Income Received in Advance A/C||Credit|
Let’s assume that in March 10,000 are received in advance for rent which belongs to the month of April.
Journal entry to record this in the current accounting period is
|To Rent Received in Advance A/C||10,000|