Revenue Received in advance is when a company receives payment from a customer for services for a certain period of time in the future. Examples of Revenue received in advance would be items such as yearly subscriptions or paying rent months in advance. The example I will elaborate on is for a company such as Hulu when customers can either pay their subscription cost on a monthly basis or pay for a year at a time. For the customer, paying their subscription a year at a time is more cost-effective but they are locked in for a minimum of a year. In regard to the companies' taxes and book values, when a customer pays revenues in advance it is all taxed upfront and then written off on the books as the year progresses. The company views this revenue as a liability and as the month's progress acknowledges the revenue. Hulu's monthly payments are $6.99 while a year subscription is $69.99 (Watroba, 2021). When the company receives monthly payments, it is taxed and placed on the books simultaneously. When Hulu receives yearly subscription payments it's all taxable income, most of it is written as a liability and the proper amount is viewed as a revenue when appropriate. Since the yearly subscription is taxed upfront towards the end of the subscription life the book value is larger than the taxable value.

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Yes Because Revenue receives in advance is favorable for the company and customer both of them for t... View the full answer