explain the meaning and accounting treatment of subscription
Answers
Explanation:
A subscription is a signed agreement between a supplier and customer that the customer will receive and provide payment for regular products or services, usually for a one-year period. ... The payment is usually applied automatically, and therefore the customer will need a credit or debit card and agree to be charged
Answer:
ANSWER
(i) Annual Subscription
(a) Any Subscriptions which are being received during an accounting year are shown on the debit side of the Receipts and Payments Account.
(b) On the other hand Subscription amounts related to the current accounting year only, whether received or yet to be received are shown on the credit side of the income and Expenditure Account by making adjustment if required for outstanding and advance.
(c) Besides deducting the amount of advance subscriptions from subscriptions received the amount of advance received subscription for the subsequent year are shown on the Liabilities side of the Balance Sheet.
(ii) Specific Donation
(a) The amount of received for specific donation is shown on the debit side of the Receipts and Payment Accounts.
(b) The amount received for specific donation is shown on the Liabilities side of the Balance Sheet because this is the amount which can only be used for the specific purpose for which it is received.
(iii) Sales of Fixed Assets
(a) The amount received from the sale proceeds of any fixed assets are recorded on the debit side of the Receipt and Payments Accounts as Receipts.
(b) Whereas the profit or loss on the sale of fixed assets is credited or debited (as the case may be ) to the Income and Expenditure Account.
(c) The book value of the fixed assets sold is deducted from its respective assets on the Assets side of the Balance Sheet.
(iv) Sale of Old Periodicals
(a) The amount received from the sale of old periodicals are shown on the debit side of the Receipts and Payments Account.
(b) As the sale of old periodicals by any organisation is considered as revenue receipts, so it is shown on the credit side of the Income and Expenditure Account.
(v) Sale of Sport Materials
(a) The amount of received from the sale of sports material are debited to the Receipts and Payments Account.
(b) As the sale of sport materials by any sport club is considered as revenue income, so it is shown on the credit side of the Income and Expenditure Account.
(vi) Life Membership Fees
(a) The amount paid by person to become a member of an organisation is called life membership fees. As this is a receipt for an NPO, so it is debited to the Receipts and Payments Account.
(b) Life membership fees is not recurring in nature and received once for a whole life from a member. Thus, as Life Membership Fees are capital receipts, so these are added to the Capital Fund on the Liabilities side of the Balance Sheet.