Subscriptions Account (Cambridge International IGCSE Accounting)

Subscriptions accounts

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

Layout of a subscriptions account

Exam Hint 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

Final answer: The Batters Final answer: Subscriptions Account
Final answer: Date	Final answer: Details	Final answer: $**	Final answer: Date	Final answer: Details	Final answer: **$
Final answer: 2023 Final answer: Jan 1	Final answer: Balance b/d	Final answer: 60	Final answer: 2023 Final answer: Jan 1	Final answer: Balance b/d	Final answer: 90
Final answer: Dec 31	Final answer: Income and expenditure	Final answer: 3 600	Final answer: Dec 31	Final answer: Bank	Final answer: 3 730
Final answer: Dec 31	Final answer: Balance c/d	Final answer: 240	Final answer: Dec 31	Final answer: Balance c/d	Final answer: 80
		Final answer: 3 900			Final answer: 3 900
Final answer: 2024 Final answer: Jan 1	Final answer: Balance b/d	Final answer: 80	Final answer: 2024 Final answer: Jan 1	Final answer: Balance b/d	Final answer: 240