Bookkeeping Question - Advanced Payment

A law office has recieved a fee payment in advance to pay for filing fees. How do you set up this account?

Should this be set up as a liability account?

Hello,

Thank you for your question.

Advanced payments, or pre-payments, should be set-up as a liability account. For example, if you received $100 advanced filing fee, it would be recorded as follows:

DEBIT $100.00 Cash Account (Asset)
CREDIT $100.00 Advance Account (Liability)

Then you would later apply the advance as follows:

DEBIT $100.00 Advance Account (Liability)
CREDIT $100.00 Filing Fees Account (Income)