Can someone provide a definition or example of this? All schweser says is shown as a CL and it satisified by delivering good instead of cash…can someone provide an example? Advance meaning what?
Deals with accrual accounting and matching principle. Consider a subscription entered into December 15, 2008, for 1 year, for daily delivery of a newspaper. Just because the client pays in advance for the entire year (or an entire month for that matter), it does not entitle the company to book the entire payment as revenue. Only that portion equivalent to the deliveries from December 15-December 31 can be booked as revenue in 2008, because only that portion matches the production costs in 2008. The rest will be booked in 2009, as the delivery takes place. Of course, the entire amount appears on the BS of the company, but part as revenues, part as unearned revenue, a liability (the portion equivalent for deliveries in 2009).
oooh so this is basically unearned Revenue?
Yes, the unearned revenue is a liability.