Question

Describe customer advances.

Answer 1

In certain situations, manufacturers or suppliers ask customers to pay an advance amount before the goods are delivered. This advance acts as a partial payment for the goods that the customers have ordered, which will be delivered at a later date. Such arrangements are common for products that are either in limited supply or have a long waiting period for delivery, like automobiles or telephone connections. A nominal interest is offered on these advances, and when the product is delivered, the advance is adjusted against the total price.