How should income received in advance be adjusted in the financial statements?

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Increase the related income by the amount received in advance and classify it as a liabilitySubtract the income received in advance from the related income and record it as a liabilityAdd the income received in advance to the related income and present it as an assetReduce the related income by the income received in advance and report it as an asset on the Balance SheetNone of the above

Explanation

Income received in advance should be deducted from the related income because it represents an obligation to provide goods or services in the future. Therefore, it is shown as a liability on the Balance Sheet to reflect this responsibility.