ABSTRACT
An advance can be described as an item received by a person in exchange for his obligation to supply a service or a product, or to provide capital on a date later than the date on which such item is received.1 As has been clarified above, GAAP does not regard the very receipt of an item in respect of a service or sale that has yet to be implemented as “income” on the date of its receipt. In effect, it addresses such an item as a liability that resembles deposit in substance.2 According to GAAP, an advance becomes income only on the date it was earned, and until the occurrence of that event the date of recognizing the advance as income is deferred. In the following discussion we will concentrate on the timing of the recognition (for tax purposes) of income from advances received by taxpayers in respect of a future service or sale.
