Subscription in advance is treated in the balance sheet under
Answer Details
Subscription in advance is treated in the balance sheet under current liabilities.
In accounting, subscription in advance refers to the situation where a customer or client pays for a product or service in advance before receiving it. This is often the case with subscription-based businesses or organizations that offer long-term services.
When a customer pays for a subscription in advance, the business has an obligation to provide the product or service over a specific period. However, until the service is provided or the product is delivered, the payment received is considered a liability because the business owes the customer the value of the subscription.
On the balance sheet, liabilities are categorized as either current liabilities or long-term liabilities. Current liabilities are obligations that are expected to be settled within a short period, typically within one year. Since subscription in advance represents an obligation that will be fulfilled within a short period, it falls under current liabilities.
By recording subscription in advance as a current liability on the balance sheet, the business acknowledges the obligation it has to deliver the service or product in the future. As time passes and the service is provided or the product is delivered, the liability is gradually reduced, and the corresponding revenue is recognized.
To summarize, subscription in advance is treated as a current liability in the balance sheet because it represents an obligation to provide a service or product to the customer in the future, and the liability is expected to be settled within a short period.