Advances, deposits and prepayments-(In Balance sheet):
Advances, deposits, and prepayments are types of transactions that involve the payment or receipt of cash or assets in advance of the related goods or services being delivered or received. Here's a brief explanation of each:
Advances:
Advances represent payments made by a company to suppliers or vendors before goods or services are delivered. These payments are typically made to secure future products or services, ensure timely delivery, or as part of contractual agreements. Advances are recorded as assets on the balance sheet until the related goods or services are received, at which point they are typically reclassified as expenses or inventory.
Deposits:
Deposits are payments made by customers or clients to a company in advance of receiving goods or services. These payments serve as a form of security or commitment and are often required for custom orders, reservations, or large purchases. Deposits are recorded as liabilities on the balance sheet until the related goods or services are delivered, at which point they are typically recognized as revenue.
Prepayments:
Prepayments, also known as prepaid expenses, occur when a company pays for goods or services in advance of receiving them. Common examples of prepayments include insurance premiums, rent payments, and subscriptions. Prepayments are recorded as assets on the balance sheet and are gradually expended over time as the related goods or services are consumed or utilized.
In summary:
advances, deposits, and prepayments are all types of transactions involving the payment or receipt of cash or assets in advance of the related goods or services being delivered or received. They are recorded on the balance sheet until the related transactions are completed, at which point they are typically reclassified or expended accordingly.
Here are some Demo sheet describes below-
Advance, Deposits & Pre-Payments
Advance against Clearing & Forwarding *****
Advance against Purchase *****
Others Advance & prepayment *****
LC Margin deposit *****
Advance against Expense *****
Advance Gas Line Installation *****
Bank Guarantee Margin *****
Security Deposit *****
Advance against purchase of Land *****
Advance Income Tax (Group) *****
Advance Tax (AT) *****