Prepaid Income

Prepaid Income

Companies can receive revenue before they have delivered associated goods or services (e.g. advance rent or advance payment for bespoke manufacturing). This is known as prepaid or unearned income. As such, prepaid income is carried on the liabilities side of the company’s balance sheet as a current liability (similar to short-debt) until delivery has taken place, at which time it can then be reported as revenue.

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