Subscriptions Account (Cambridge (CIE) O Level Accounting)
Revision Note
Written by: Donna Simpson
Reviewed by: Dan Finlay
Subscriptions Account
What is a subscriptions account?
A subscriptions account is prepared to show the amount of subscriptions that relates to the financial year
This amount is then transferred to the income and expenditure account
Subscription is an income and is treated in the same way as income accounts of trading businesses are treated
What is the layout of a subscriptions account?
The subscriptions account looks very similar to any other income account
The account may have two balances
A debit balance for subscriptions in arrears
This amount is still owed to the organisation
Therefore it is an asset
A credit balance for subscriptions paid in advance
This amount has been paid for future services which the organisation must provide
Therefore it is a liability
There might be irrecoverable debts that have been written off
The amount would be credited to the subscriptions account
Examiner Tips and Tricks
Just remember that this is the same as an income account. This will reduce the amount you need to remember.
Worked Example
The Batters is a baseball club. Members pay a monthly subscription of $10 per month to use the facilities and equipment. The treasurer wants to know the amount to be transferred to the income and expenditure account for the year ended 31 December 2023. The following information was provided:
1 December 2022, nine members paid in advance for the month of January 2023
31 January 2023, six members paid the amount owing for month of December 2022
31 December 2023, eight members owe the month of December 2023
16 December 2023, two members paid in full for the year ending 31 December 2024
Received $3 730 in total from members for subscriptions during the year ended 31 December 2023
Prepare the subscription account for the year ended 31 December 2023. Bring down the balance on 1 January 2024.
Answer
Deal with each piece of information separately and identify which side to enter the amount.
1 December 2022, nine members paid in advance for January 2023
This is a prepayment from the previous year
This is the opening balance on the credit side
9 × $10 = $90
31 January 2023, six members paid the amount owing for December 2022
This is an accrual from the previous year
This is the opening balance on the debit side
6 × $10 = $60
31 December 2023, eight members owe the month of December 2023
This is an accrual for this year
This is the opening balance on the debit side for next year
Therefore the balance c/d is on the credit side
8 × $10 = $80
16 December 2023, two members paid in full for the year ending 31 December 2024
This is a prepayment for the next year
This is the opening balance on the credit side for next year
Therefore the balance c/d is on the debit side
2 × 12 × $10 = $240
Received $3 730 in total from members for subscriptions during the year ended 31 December 2023
This is the amount received
Enter this on the right side
Calculate the amount to transfer to the income and expenditure account. You can find the balancing figure for the account. Alternatively, you can calculate it from the information by adding amounts which are due this year and subtracting amounts that are not due this year.
Start with the amount received for the year
Subtract the accrual from last year
Add the prepayment from last year
Add the accrual at the end of this year
Subtract the prepayment at the end of this year
$3 730 - $60 + $90 + $80 - $240 = $3 600
Enter the details into the account.
The Batters Subscriptions Account | |||||
Date | Details | $ | Date | Details | $ |
2023 Jan 1 |
Balance b/d |
60 | 2023 Jan 1 |
Balance b/d |
90 |
Dec 31 | Income and expenditure | 3 600 | Dec 31 | Bank | 3 730 |
Dec 31 | Balance c/d | 240 | Dec 31 | Balance c/d | 80 |
3 900 | 3 900 | ||||
2024 Jan 1 |
Balance b/d |
80 | 2024 Jan 1 |
Balance b/d |
240 |
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