Question

If a customer pays your company in advance of you doing the work, would you call that amount Revenue?

Answer 1

Under the Accrual basis of accounting, when the customer is paying the company in advance, it is treated as a liability for the company because it is a payment which is received in advance on the liability side.

The company will be passing the entry of debiting the cash and crediting the liability account such as deferred revenue account deferred income or unearned revenue account.

The amount which has been received in advance by the customer to the company will be treated as liability not revenue