When money hits your bank account before you’ve done the work, it can feel like income, but accounting tells a different story. Income received in advance is a promise, not profit. Whether it’s prepaid rent, school fees, or a subscription, this money belongs on your balance sheet as a liability until you’ve earned it. Understanding this simple concept helps businesses stay honest, accurate, and financially sound.

Prepayments may seem like small accounting entries, but they reveal a lot about how a business thinks about time and value. Paying upfront for future benefits is not just a cash flow decision — it’s a lesson in discipline, foresight, and financial honesty. For accountants in practice, explaining prepayments in plain language can turn a routine adjustment into a powerful conversation about planning, trust, and smarter business. After all, good accounting is not about the past; it’s about making tomorrow’s numbers make sense.