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What is the difference between a Advance Payment and Advance from customers?

What is the difference between a Advance Payment and Advance from customers?

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Answer #1

Advance payment:

It refers to cash paid in advance for expenses.

It should be treated as Asset

It is shown in balance sheet as 'Prepaid Expense' under Assets.

Example: Office rent paid in advance for the next 2 months.

Advance from customers

It refers to cash received in advance from customers for the future services or sales

It should be treated as Liability

It is shown in balance sheet as 'Unearned revenue' under Liabilities

Example: Cash received in advance from customer for services to be rendered in next year.

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