Finance/Compliance Consultant
59914 Points
Joined June 2010
Anything paid in advance is an ASSET for the business organisation. When you have given advance you have made an asset entry into your books of accounts and credited the cash/bank which got reduced in your books of accounts due to the payment made. Now when the actual material is received by you you need to debit the same and credit the earlier advance entry created temporarily to set off the and bring the balance to NIL for the earlier advance entry effected. Now only machinery will be shown as an asset in Financial Statements.