What statement and type of account does Income Received in Advance belong to?
Understand the Problem
The question is asking for the classification of the account 'Income Received in Advance' in terms of which financial statement it belongs to and its type. It's looking for an understanding of accounting principles regarding how this type of income is reported.
Answer
Statement of financial position and liability.
The final answer is Statement of financial position and liability.
Answer for screen readers
The final answer is Statement of financial position and liability.
More Information
Income received in advance is considered a liability because it represents obligations to provide goods or services in the future.
Tips
A common mistake is to classify it as an asset, which it is not since the income is not yet earned.
Sources
- Prepaid Expenses, Accrued Income & Income Received in Advanced - toppr.com
- What Deferred Revenue Is in Accounting, and Why It's a Liability - investopedia.com
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