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Optimise your business with Acconto payments: Understand the accounting process and benefits

Acconto - Accounting

Acconto is a financial term often used in both accounting and e-commerce. It refers to a prepayment or deposit made as part of a larger sum, either as security or as a partial payment for a product or service.

Introduction to acconto

Acconto payments are common in many different business contexts. They can be used as prepayments for goods and services, as collateral, or as part of an ongoing agreement. For example, a customer might pay a portion of the total price for a product in advance, giving the seller some security and liquidity before the full amount is due.

Use of acconto in accounting

In accounting, acconto payments are treated as advance payments. These payments must be properly recorded in the financial statements to reflect the company's true financial position. When an acconto payment is received, it is recorded as a prepayment (or liability) on the balance sheet until the final product or service is delivered and the full amount is settled.

To illustrate this, let’s take an example: If a company receives an acconto payment of 10,000 DKK for an order totaling 50,000 DKK, this payment is recorded as a prepayment. Once the product or service is delivered and the full amount is paid, the prepayment is transferred to revenue in the income statement.

Example of acconto calculation in practice

Here is a practical example of how acconto payments can be calculated and recorded in accounting:

Example:

A customer orders a product with a total price of 50,000 DKK. The customer agrees to pay 20% in acconto and the rest upon delivery. Here are the necessary calculations and bookkeeping entries:

1. Calculation of acconto payment:

20% of 50,000 DKK = 0.20 * 50,000 DKK = 10,000 DKK

2. Bookkeeping upon receiving acconto:

Debit: Bank account 10,000 DKK 
Credit: Prepayments from customers 10,000 DKK

3. Delivery and final payment:

After delivery, the customer pays the remaining balance of 40,000 DKK (50,000 DKK - 10,000 DKK).

4. Bookkeeping upon final payment:

Debit: Bank account 40,000 DKK 
Credit: Revenue 50,000 DKK 
Debit: Prepayments from customers 10,000 DKK

The total revenue of 50,000 DKK is now correctly recorded in the income statement, and the prepayment of 10,000 DKK is removed from the balance sheet.

Acconto payments are useful tools for both sellers and buyers. For sellers, they provide protection against losses and ensure some liquidity. For buyers, they can secure goods or services that may not be immediately available. It is important that both buyers and sellers understand the terms and implications of acconto payments to handle them properly in their accounting.

Advantages of acconto

Acconto payments have several advantages:

  • Liquidity: The seller receives part of the payment upfront, which can help improve the company’s liquidity.
  • Security: It provides security for the seller since part of the payment is received before delivery.
  • Trust: It can build trust between the buyer and seller, as both parties have a commitment from the start.

Disadvantages of acconto

There are also some disadvantages to acconto payments:

  • Prepayment: The buyer must pay a portion upfront, which can be a downside if the product or service is not delivered as agreed.
  • Accounting Handling: Proper accounting handling is required to ensure that acconto payments are recorded and managed correctly.

Conclusion

Acconto payments are an important part of both accounting practices and business operations, especially in e-commerce and other industries where prepayments are common. By understanding and properly managing acconto payments, businesses can improve liquidity, reduce the risk of loss, and build trust with their customers. Proper bookkeeping ensures that the company’s financial statements accurately reflect its financial status.

Learn all about advanced payments and how they can help your business manage cash flow and ensure financial stability. Find out how cash on delivery can be used effectively in your online store