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Difficulty: MediumAccounting Treatment of Subscriptions

During the financial year ended 31 December 2025, United Teachers Social Welfare Association received N520,000\text{N}520,000 in cash as subscription fees from its members. At the beginning of the year (1 January 2025), subscriptions accrued were N35,000\text{N}35,000, while subscriptions prepaid were N22,000\text{N}22,000. At the end of the year (31 December 2025), subscriptions accrued amounted to N48,000\text{N}48,000 and subscriptions prepaid amounted to N18,000\text{N}18,000. Calculate the subscription income to be credited to the Income and Expenditure Account for the year ended 31 December 2025.

Answer: 537000 NGN

Answer

537000
Under accrual accounting, subscription income credited to the Income and Expenditure Account represents income earned in the current financial year regardless of cash timing. Subscription Income = Cash Received (520,000) + Opening Advance (22,000) + Closing Arrears (48,000) - Opening Arrears (35,000) - Closing Advance (18,000) = NGN 537,000.

Step-by-Step Solution

1
Identify total subscription cash received during the year
NGN 520,000
This is the initial cash flow entry from the Receipts and Payments account.
2
Adjust for opening accruals and prepayments
NGN 520,000 - NGN 35,000 + NGN 22,000 = NGN 507,000
Subscriptions owing from previous period (opening arrears) are deducted, while subscriptions received in advance in previous period (opening advance) belong to current income and are added.
3
Adjust for closing accruals and prepayments
NGN 507,000 + NGN 48,000 - NGN 18,000 = NGN 537,000
Subscriptions owing for current period (closing arrears) are added, while subscriptions received in advance for next period (closing advance) are subtracted.

Key Concept

Accrual basis adjustment for non-profit subscriptions
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Topics

Accounting Treatment of Subscriptions

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