How to treat income received in advance in the financial statement

This is income that has been received but for which the (receiving) entity has not yet worked for. Because the entity has not worked for such, it is regarded as a liability and it is treated as such in the statement of financial position.

Treatment in the accounts
In the income statement, deduct the income received in advance from the total         income (ie debit income) shown in the trial balance to arrive at the true income for the accounting period under reference.

In the statement of financial position, income received in advance is shown as a current liability.