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Difficulty: EasyAccounting Treatment of Subscriptions

Apex Recreation Club received N50,000\text{N}50,000 in cash as total subscriptions from its members during the year. Subscriptions in arrears at the start of the year were N5,000\text{N}5,000, while subscriptions paid in advance at the start of the year were N4,000\text{N}4,000. At the end of the year, subscriptions in arrears were N6,000\text{N}6,000, and subscriptions paid in advance were N3,000\text{N}3,000. What amount in Naira will be credited to the Income and Expenditure Account as subscription income for the year?

Answer: 52000 Naira

Answer

52000
According to the accrual concept of accounting, subscription income credited to the Income and Expenditure Account reflects income earned for the current financial period regardless of cash receipt timing: Subscription Income = Cash Received (N50,000) + Opening Advance (N4,000) + Closing Arrears (N6,000) - Opening Arrears (N5,000) - Closing Advance (N3,000) = N52,000.

Step-by-Step Solution

1
Start with cash subscriptions received during the period
N50,000
This is the actual cash collected and recorded in the Receipts and Payments account.
2
Add subscriptions received in advance at the beginning of the period and accrued subscriptions at the end of the period
N50,000 + N4,000 + N6,000 = N60,000
Advance subscriptions from the start belong to the current year, and accrued subscriptions at year-end represent current year income earned but not yet collected.
3
Deduct subscriptions accrued at the beginning of the period and subscriptions received in advance at the end of the period
N60,000 - N5,000 - N3,000 = N52,000
Opening accrued subscriptions were earned in the previous period, and closing advance subscriptions belong to the subsequent accounting period.

Key Concept

Subscription Account Accrual Adjustments
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Topics

Accounting Treatment of Subscriptions

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