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Prepaid Income is a balance sheet item. Income received in advance is treated as Liability of the firm. The same get transferred to Income Statement / Profit & Loss Account when income is earned.

Followed by Accrual Accounting concept and Accounting Period Concept, such income received before they are actually earned are booked as a liability and get transferred to Income Statement as income upon actually earning them.

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Q: Prepaid income balance sheet or income statement?
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