To start with let me give you a brief explanation of what a subscription is After joining a not-for-profit organization, a member is required to pay a certain amount of money every year at periodical intervals in order to keep his membership activated, such an amount of money is the subscription. FoRead more
To start with let me give you a brief explanation of what a subscription is
After joining a not-for-profit organization, a member is required to pay a certain amount of money every year at periodical intervals in order to keep his membership activated, such an amount of money is the subscription.
For accounting purposes, subscription is always taken on an accrual basis which means the amount which is received during the current year is only taken into consideration.
Now, Subscription received in advance means the amount of money that has been received during the current year but which relates to the year that is yet to come. In other words, we can say it is the unearned income by the organization.
It is recurring in nature and liability for the organization as it does not relate to the current year.
Journal Entry for Subscription received in advance
Here, the Subscription received in advance is credited to the Subscription account for the current year.
This is the adjustment entry made during the current year.
Treatment of Subscription in Financial Statements
Receipts and payment account.
Income and expenditure account.
Balance sheet.
Receipts and Payment account: In the receipts and payment account, the entire amount of subscription is written on the receipts side. That is to say, subscription amount relating to the previous year, current year, and the year to come (outstanding subscription, current year subscription, advance subscription).
Income and Expenditure account: In the Income and Expenditure Account, the subscription comes on the Income side. It is shown as
Here, a subscription received in advance in the current year is deducted to find the actual amount because although the money is received in advance the benefits related to it are yet to be provided by the organization.
Balance sheet: In the balance sheet, a subscription received in advance comes in the liability side under current liabilities as the benefits related to it are yet to be derived.
For Example, Lionel club received subscription from its members for the year 2020 as follows-
Subscription of 2020 was received in 2019 – 2,000
Subscription of 2021 was received in 2020 – 3,000
The total subscription was received during the year – 10,000
Here,
Subscription of 2020 was received in 2019- It is an Outstanding Subscription.
Subscription of 2021 was received in 2020- It is an advance Subscription.
To start with let me give you a brief explanation of what a subscription is After joining a not-for-profit organization, a member is required to pay a certain amount of money every year at periodical intervals in order to keep his membership activated, such an amount of money is the subscription. FoRead more
To start with let me give you a brief explanation of what a subscription is
After joining a not-for-profit organization, a member is required to pay a certain amount of money every year at periodical intervals in order to keep his membership activated, such an amount of money is the subscription.
For accounting purposes, subscription is always taken on an accrual basis which means the amount which is received during the current year is only taken into consideration.
Now, Subscription received in advance means the amount of money that has been received during the current year but which relates to the year that is yet to come. In other words, we can say it is the unearned income by the organization.
It is recurring in nature and liability for the organization as it does not relate to the current year.
Journal Entry for Subscription received in advance
Here, the Subscription received in advance is credited to the Subscription account for the current year.
This is the adjustment entry made during the current year.
Treatment of Subscription in Financial Statements
Receipts and Payment account: In the receipts and payment account, the entire amount of subscription is written on the receipts side. That is to say, subscription amount relating to the previous year, current year, and the year to come (outstanding subscription, current year subscription, advance subscription).
Income and Expenditure account: In the Income and Expenditure Account, the subscription comes on the Income side. It is shown as
Here, a subscription received in advance in the current year is deducted to find the actual amount because although the money is received in advance the benefits related to it are yet to be provided by the organization.
Balance sheet: In the balance sheet, a subscription received in advance comes in the liability side under current liabilities as the benefits related to it are yet to be derived.
For Example, Lionel club received subscription from its members for the year 2020 as follows-
The total subscription was received during the year – 10,000
Here,
Subscription of 2020 was received in 2019- It is an Outstanding Subscription.
Subscription of 2021 was received in 2020- It is an advance Subscription.
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