An
advance payment, or simply an
advance, is the part of a
contractually due sum that is paid or received in advance for goods or services, while the
balance included in the
invoice will only follow the delivery. It is called a
prepaid expense in
accrual accounting for the entity issuing the advance. Advanced payments are recorded as assets on the balance sheet. As these assets are used they are expended and recorded on the income statement for the period in which they are incurred. Insurance is a common prepaid asset, which will only be a prepaid asset because it is a proactive measure to protect business from unforeseen events.