Plsee explain the example of income received in advance ?

An example of income received in advance is when a company receives payment from a customer for goods or services that have not yet been provided. This is also known as unearned revenue or deferred revenue.

For instance, let's say a software company receives an upfront payment of $1,200 from a customer for a one-year subscription to their software. The company has not yet provided the software to the customer, but they have received the payment in advance.

In this case, the $1,200 would be recorded as a liability on the company's balance sheet under the category of "unearned revenue" or "deferred revenue." This is because the company has an obligation to provide the software to the customer in the future.

As the company provides the software to the customer over the course of the year, they would recognize the revenue earned from the subscription on their income statement. Each month, they would recognize $100 ($1,200 divided by 12) as revenue and reduce the liability of unearned revenue by the same amount.

By the end of the year, the liability of unearned revenue would be reduced to zero, and the full $1,200 would be recognized as revenue on the income statement.