The Receipt of Cash in Advance From A Customer Journal Entry

When the Receipt of Cash in Advance From a Customer is received, then the Journal Entry is to debit the Cash Account and credited the Liability Account (Advance From Customer Account) as the services or goods still to be delivered to customers later on by the company. The entry is shown below:

                                                    Cash a/c   XXX

                                         Advance from Customer a/c   XXX

(Advance Received From Customer)

An Adjusting Entry is made when the company actually renders the services or delivered the services to clients.

Customer Advances are an example of Unearned Revenue which is not actually earned by the company but the payment is already received by it from the clients.

Advances from Customers is a Current Liability and it is shown on Balance Sheet under the head of Current Liabilities On Liabilities & Equity side.

The Normal Balance for Advances From Customers is Credit, however, when it is created, we credit it and when it is closed to Income Statement, we Debit it.