Governments also provide advances to taxpayers such as social security. Another example is for authorized U.S. taxpayers who have received advances through the IMC Credit (TPC), which is proposed under the Health Care Agreement (ACA). Financial assistance helps citizens who meet household income requirements to pay for their health insurance. The money owed to the taxpayer is paid into the insurance before the actual maturity of the loan. Advances are amounts paid before a good or service is actually received. The balance due, if it exists, will be paid after delivery. These types of payments are in contrast to deferred payments – or arrears. In these cases, goods or services are delivered first and then paid for later.
For example, an employee paid at the end of each month to work this month receives a deferred payment. In the corporate world, companies often have to make advances to suppliers when their orders are large enough to put the burden on the manufacturer. This is particularly the case when the buyer decides to withdraw from the transaction before delivery. Consumers with non-performing loans may also be required to make advances to creditors before they can purchase goods or services. There are many cases where advances are required. Consumers with non-performing loans may be forced to pay businesses in advance, and insurance generally requires a down payment to extend insurance coverage to the insured. Advances are usually made in two situations. They can be applied to a sum of money provided before a contract-agreed due date, or may be requested before receiving the requested goods or services. Advances can help producers who do not have enough capital to buy materials to complete a large order, as they can use some of the money to pay for the product they are going to create. It can also be used as a guarantee that a certain amount of revenue will be provided by the production of the large contract. When a company is required to make a down payment, it is recorded on the balance sheet as a prepaid effort in accordance with the accrual accounting method.
Advances are recorded as assets on a company`s balance sheet. As these assets are used, they are consumed and recorded in the profit and loss account for the period during which they are generated.