Advances

Advances or advance is generally identified for advance payments. If a company wants to acquire goods or assets or any services from other party, then sometime it can give some money to that party before purchasing and delivery of goods and services. This payment is called advance. This is the asset of company. If advance is given partly, then company will pay balance cash after actual delivery of goods. If advance is given for expenses, then accountant shows prepaid expenses or advance expenses as current asset in balance sheet of company.

In the field of property dealing, an advance against purchased property is a payment made by the purchaser to the seller at the time of contract (usually immediately upon contract) and promise to pay balance fund after certain period of time. For example, Ram the owner of Shanti house may vend his house to Sham for Rs. 90, 00,000 and get Rs. 9, 00,000  against that house at the time of contract. Rs. 9,00,000 is advance. This also a special form of loan but there is no interest on such advance payments.