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Question

Difficulty: MediumAccounting Treatment of Subscriptions

Lakeside Tennis Club provided the following financial information regarding subscriptions for the year ended 31 December 2025:

- Subscriptions received in cash during the year: N150,000\text{N}150,000
- Subscriptions in arrears on 1 January 2025: N12,000\text{N}12,000
- Subscriptions received in advance on 1 January 2025: N8,000\text{N}8,000
- Subscriptions in arrears on 31 December 2025: N18,000\text{N}18,000
- Subscriptions received in advance on 31 December 2025: N10,000\text{N}10,000

What is the total subscription income to be credited to the Income and Expenditure Account for the year ended 31 December 2025?

  1. A
    N138,000\text{N}138,000
  2. B
    N146,000\text{N}146,000
  3. C
    N150,000\text{N}150,000
  4. N154,000\text{N}154,000Answer

Answer

N154,000\text{N}154,000
Under the accrual concept, subscription income for the period is calculated as cash received during the year minus subscriptions in arrears at the start of the year plus subscriptions in advance at the start of the year plus subscriptions in arrears at the end of the year minus subscriptions in advance at the end of the year: N150,000−N12,000+N8,000+N18,000−N10,000=N154,000\text{N}150,000 - \text{N}12,000 + \text{N}8,000 + \text{N}18,000 - \text{N}10,000 = \text{N}154,000.

Step-by-Step Solution

1
Identify cash received during the year
Cash received = N150,000\text{N}150,000
This is the starting cash figure from the Receipts and Payments Account.
2
Adjust for opening balances
N150,000−N12,000+N8,000=N146,000\text{N}150,000 - \text{N}12,000 + \text{N}8,000 = \text{N}146,000
Opening arrears belong to the previous period and must be deducted; opening advance belongs to the current period and must be added.
3
Adjust for closing balances
N146,000+N18,000−N10,000=N154,000\text{N}146,000 + \text{N}18,000 - \text{N}10,000 = \text{N}154,000
Closing arrears represent income earned in the current period but unpaid (add); closing advance represents income received for the next period (deduct).

Key Concept

Accounting Treatment of Subscriptions in Non-Profit Organizations
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Topics

Accounting Treatment of Subscriptions

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