Final answer:
When a contract specifies prepayment before delivery, the customer is essentially making a payment to the seller and is receiving compensation for the time value of money.
Step-by-step explanation:
When a contract specifies prepayment before delivery, the customer is essentially making a payment to the seller. This payment compensates the seller for the time value of money, which is the ability to delay using money until later. It accounts for the fact that the seller is providing a product or service upfront, but the customer is paying in advance, allowing the seller to have access to the funds and benefit from them before completing the delivery.