How do you record the receipt of money paid as an advance of fees or an indemnity?
When you receive an advance, you have on one hand:
b) a Liability
Journal entry - receipt of funding or payments in advance
CR Indemnity Funding Advance (Liab)
- The CASH is the ASSET
- The liability records the obligation to do something with it.
You don't record the Advance as an asset because you would have two assets a) the cash at bank and b) a negative asset fee advance.
So as the fees are incurred, you draw down the liability account because you are reducing the obligation to pay back the advance.
Journal entry - incurring fees
DR Indemnity Funding
There isn't any "fee expense entry" to the business because the fees were not paid by them.
Journal entry - repayment of the balance of advance
If there's money left over you pay it back and clear out the liab account:
DR Indemnity Funding (Liab)