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Difficulty: MediumAccounting Treatment of Subscriptions

During the financial year ended 31 December 2025, Maritime Workers Social Club received N150,000\text{N}150,000 in cash as subscriptions from its members. At 1 January 2025, subscriptions owing by members amounted to N12,000\text{N}12,000, while subscriptions paid in advance were N8,000\text{N}8,000. At 31 December 2025, subscriptions owing by members were N15,000\text{N}15,000, and subscriptions paid in advance amounted to N10,000\text{N}10,000. What amount should be credited to the Income and Expenditure Account as subscription income for the year ended 31 December 2025?

Answer: 151000 Naira

Answer

The subscription income to be credited to the Income and Expenditure Account for the year ended 31 December 2025 is N151,000\text{N}151,000.
Under accrual accounting for non-profit entities, subscription income for the year is computed by starting with cash received (N150,000\text{N}150,000), adding closing arrears (N15,000\text{N}15,000) and opening advance (N8,000\text{N}8,000), and subtracting opening arrears (N12,000\text{N}12,000) and closing advance (N10,000\text{N}10,000), giving N151,000\text{N}151,000.

Step-by-Step Solution

1
Identify total cash received for subscriptions
Cash received = N150,000\text{N}150,000
This is the initial cash flow entry from the Receipts and Payments Account.
2
Adjust for subscriptions in arrears at the beginning and end of the financial year
Add ending arrears (N15,000\text{N}15,000) and subtract opening arrears (N12,000\text{N}12,000)
Ending arrears relate to the current period and must be accrued. Opening arrears relate to the previous period and must be removed from current receipts.
3
Adjust for subscriptions in advance at the beginning and end of the financial year
Add opening advance (N8,000\text{N}8,000) and subtract ending advance (N10,000\text{N}10,000)
Opening advance was received in the past for the current period, so it is added. Ending advance is received now for the future period, so it is deducted.
4
Compute final subscription income figure
N150,000+N15,000−N12,000+N8,000−N10,000=N151,000\text{N}150,000 + \text{N}15,000 - \text{N}12,000 + \text{N}8,000 - \text{N}10,000 = \text{N}151,000
Applying accrual accounting rules yields the true earned subscription income for the accounting year.

Key Concept

Accrual principle applied to subscription income in non-profit organization accounts
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Topics

Accounting Treatment of Subscriptions

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