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Difficulty: HardAccounting Treatment of Subscriptions

Palm Grove Recreation Society provided the following information regarding subscriptions for the financial year ended 31 December 2025:

- Subscriptions in arrears at 1 January 2025: N12,500\text{N}12,500
- Subscriptions in advance at 1 January 2025: N8,400\text{N}8,400
- Total subscription cash received during 2025: N195,000\text{N}195,000
- Subscriptions in advance at 31 December 2025: N4,000\text{N}4,000
- Subscriptions in arrears at 31 December 2025: N11,200\text{N}11,200

During the year, subscriptions amounting to N3,000\text{N}3,000 due from 2024 were declared irrecoverable and written off by the executive committee.

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

  1. N201,100\text{N}201,100Answer
  2. B
    N198,100\text{N}198,100
  3. C
    N194,900\text{N}194,900
  4. D
    N195,100\text{N}195,100

Answer

The subscription income to be credited to the Income and Expenditure Account for 2025 is N201,100\text{N}201,100.
To determine subscription income for the Income & Expenditure Account under the accrual concept:
Income=Cash Received+Opening Advance+Closing Arrears+Subscriptions Written Off−Opening Arrears−Closing Advance\text{Income} = \text{Cash Received} + \text{Opening Advance} + \text{Closing Arrears} + \text{Subscriptions Written Off} - \text{Opening Arrears} - \text{Closing Advance}
Income=195,000+8,400+11,200+3,000−12,500−4,000=201,100\text{Income} = 195,000 + 8,400 + 11,200 + 3,000 - 12,500 - 4,000 = 201,100
Therefore, N201,100\text{N}201,100 is credited to the Income and Expenditure Account.

Step-by-Step Solution

1
Identify the credit items in the Subscription Account
Subscriptions received in cash (N195,000\text{N}195,000), Subscriptions in advance on 1 Jan (N8,400\text{N}8,400), Subscriptions in arrears on 31 Dec (N11,200\text{N}11,200), and Subscriptions written off (N3,000\text{N}3,000). Total credits = N217,600\text{N}217,600.
Credit items represent cash collected, income earned prior but deferred to this period, accrued income for the period, and written-off debts reducing opening arrears.
2
Identify the debit items in the Subscription Account
Subscriptions in arrears on 1 Jan (N12,500\text{N}12,500) and Subscriptions in advance on 31 Dec (N4,000\text{N}4,000). Total debit adjustments = N16,500\text{N}16,500.
Opening arrears relate to prior year income, and closing advance relates to future year income, so both must be excluded from current year revenue.
3
Calculate the balancing figure for Income and Expenditure Account
N217,600−N16,500=N201,100\text{N}217,600 - \text{N}16,500 = \text{N}201,100.
The difference between total credits and non-I&E debits is the actual subscription income earned for the current accounting period.

Key Concept

Accrual basis of accounting for subscriptions in non-profit organizations
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Topics

Accounting Treatment of Subscriptions

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