Question

Select the most appropriate alternative from those given below and rewrite the statement.

Income received in advance is shown on the __________________.
a) debit
b) credit
c) asset
d) liability

Answer 1

Income received in advance is shown on the liability side.

Explanation: Income received in advance is an example of Representative Personal Account and always shows a credit balance (being a liability). This income is received in the current year but belongs to the next year. So, it represents a liability; therefore, it is recorded on the Liabilities side of the Balance Sheet.