Revenues Received in Advance


Revenues Received in Advance

Sometimes firms receive cash prior to rendering services or supplying the goods to which the payment relates.  Only revenues earned in the accounting period should be included in the profit and loss account for that period.  Any portion of revenue received which relates to goods to be provided or services to be rendered in the future should be carried forward to future accounting periods.  Such revenues are carried forward as liabilities because they represent an obligation for the firm to provide goods or services in the future. If such goods or services are not delivered the amount received would have to be paid back.

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