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Zorluk: OrtaAccounting Treatment of Subscriptions

During the year ended 31 December 2025, Midland Officers Club received N240,000\text{N}240,000 in cash as subscription payments from its members. Additional information regarding subscriptions is provided below:

- Subscriptions in arrears on 1 January 2025: N25,000\text{N}25,000
- Subscriptions in advance on 1 January 2025: N18,000\text{N}18,000
- Subscriptions in arrears on 31 December 2025: N32,000\text{N}32,000
- Subscriptions in advance on 31 December 2025: N15,000\text{N}15,000

What amount (in Naira) should be credited to the Income and Expenditure Account as subscription income for the year ended 31 December 2025?

Cevap: 250000 NGN

Cevap

The amount credited to the Income and Expenditure Account as subscription income for the year ended 31 December 2025 is N250,000\text{N}250,000.
Under accrual accounting principles for non-profit entities, subscription income recognized in the Income and Expenditure Account represents the total revenue earned for that specific financial year. Starting with cash received of N240,000\text{N}240,000, we subtract opening arrears of N25,000\text{N}25,000 (income from prior year), add opening advance of N18,000\text{N}18,000 (income prepaid for current year), add closing arrears of N32,000\text{N}32,000 (earned but unpaid current income), and subtract closing advance of N15,000\text{N}15,000 (income prepaid for next year). This yields N250,000\text{N}250,000.

Adım Adım Çözüm

1
Record total subscription cash received during the financial year.
Cash received = N240,000\text{N}240,000
This forms the base figure for calculating the earned subscription income under accrual accounting.
2
Adjust for opening balances (1 January 2025).
Deduct opening arrears (N25,000\text{N}25,000) and add opening advance (N18,000\text{N}18,000).
Subscriptions in arrears at the start belong to the prior period, while subscriptions in advance at the start were paid for the current period.
3
Adjust for closing balances (31 December 2025).
Add closing arrears (N32,000\text{N}32,000) and deduct closing advance (N15,000\text{N}15,000).
Closing arrears represent current period income earned but uncollected, whereas closing advances represent money received for the next financial year.
4
Compute the net subscription income.
N240,000−N25,000+N18,000+N32,000−N15,000=N250,000\text{N}240,000 - \text{N}25,000 + \text{N}18,000 + \text{N}32,000 - \text{N}15,000 = \text{N}250,000
The final adjusted figure reflects the total subscription revenue applicable strictly to the current accounting year.

Anahtar Kavram

Accrual concept applied to non-profit subscriptions account
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Konular

Accounting Treatment of Subscriptions

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