Scroll Top

search-icon
    drop-arrow

    Advance Payment

    Meaning of an Advance Payment

    Advance payment is a kind of payment made in advance of its normal schedule, such as payment for a good or service before you actually receive it. Advance payments sometimes are needed by sellers to protect against non-payment or to cover out-of-pocket service or product costs.

    There are many cases in which advance payments are required. Consumers with bad credits may be required to pay companies in advance, and insurance companies generally require an advance payment in order to extend coverage to the insured party.

    Importance of Advance Payments

    Advance payments are sums charged before the goods or services are finally received. The balance due, if any, shall be paid as soon as the payment is made. These forms of payments are in contrast to deferred payments or arrears payments. In these instances, goods or services are delivered first and then paid for later. For example, an employee who is compensated for that month's work at the end of each month.

    Advance payments are reported as assets on the balance sheet of the company. When these assets are used, they are spent and reported on the income statement for the period in which they are incurred.

    Advance payments are typically made in two cases. They may refer to the sum of money paid before the contractually negotiated due date, or they may be needed before the goods or services demanded are obtained.

    Special Considerations Concerning Advance Payments

    Within the business sector, businesses often have to make advance payments to suppliers when their orders are high enough to be burdensome for the manufacturer. It is particularly valid if the customer wants to withdraw from the offer before delivery.

    Advance payments may benefit suppliers who do not have enough cash to buy products to meet a large order because they will use some of the money to pay for the product they are making. This may also be seen as a guarantee that a certain amount of revenue will come from the output of a large order.

    Popular Topics

    Latest Articles

    Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

    Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

    CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

    Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

    Cleartax is a product by Defmacro Software Pvt. Ltd.

    Company PolicyTerms of use

    ISO

    ISO 27001

    Data Center

    SSL

    SSL Certified Site

    128-bit encryption