When a company receives cash in advance from customer for services to be performed in future , the transaction affects the liability account.
Advance from customer is a liability account , in which is stored all payments from customers for goods or services that have not yet been delivered.
What is liability account?
Liability accounts are categories within the business's books that show how much it owes, A debit to a liability account means the business doesn't owe so much i.e reduced liability , and a credit to a liability account means the business owes more i.e, increases the liability.
Liability account appears on the business's balance sheet.
Records of advance payment accounting
whenever an advance payment is made , the accounting entry is expressed as a debit to the assets cash for the amount received . A credit also needs to be made to the liability account-something along the lines of Advance Payments ,Unearned revenue,or Customer Advances.
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