Question 3 (c)
NPO: subscription income and its presentation
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 3 (c) · 6 marksThe following information was obtained from the Secretary of the Jolly Riders Club:
| ₹ | |
|---|---|
| Subscriptions received in 2023-24 as per Receipts and Payments Account | 120000 |
| Advance Subscriptions received in 2022-23 | 6000 |
| Subscriptions outstanding at the end of 2023-24 (including ₹ 2000 for 2022-23) | 15000 |
| Advance Subscriptions received for 2024-25 | 4000 |
| Subscriptions written off during 2023-24 | 800 |
| Subscriptions receivable on 1.4.2023 | 10000 |
Prepare:
a statement/account that shows the Subscriptions income for the year ended 31.3.2024 and
show how the relevant items will appear in the year's Income and Expenditure Account and in the Balance Sheet as at the year end.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Prepare : (i) a statementProper formats (heading, date, both sides): post the plain items, then each adjustment, and balance last.
What the paper leaves open
The paper gives an advance subscription "received in 2022-23" (in our version) without saying which year it pays for. It is read as an advance for the current year, 2023-24, and credited to this year's income: an advance received in one year is normally for the next, and nothing points to a longer period. If part of it were for a later year, this year's income would be lower by that part, which would stay as an advance in the Balance Sheet.
Write it in this order
- Read the data; tick every adjustment as you plan it 1 min
- 1 Subscription Account, income 3 marks 5 min
- 2 Income & Expenditure Account extract 1½ marks 2 min
- 3 Balance Sheet extract 1½ marks 2 min
- Check: every adjustment used, both sides agree, dates in 2 min
Short on time? Step 1 carries 3 of the 6 marks: guard its minutes.
Final answer
Check your own figures against these.
- Subscription income for
- 2023-24 ₹1,27,800
- Written off
- ₹800
- Outstanding
- ₹15,000
- asset
- Received in advance
- ₹4,000
- liability
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution and check your figures against the final answer.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Only the subscription that relates to the year concerned is credited to the Income & Expenditure Account: an amount received for an earlier year extinguishes a debt owing to the club, and an amount received for a later year is a liability, "subscription received in advance".
Reading. The ₹800 written off during 2023-24 relates to the arrears of 2022-23: the current year's unpaid dues are all shown as outstanding at the year end, so nothing of 2023-24 has been written off. Of the ₹10,000 owed for 2022-23 at the start of the year, ₹800 was written off and ₹2,000 is still owed, so ₹7,200 was collected.
(i) Subscription Account for the year ended 31 March 2024 (foots ✓)
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Balance b/d (outstanding on 1 April 2023) | 10,000 | By Balance b/d (received in advance in 2022-23) | 6,000 |
| To Income & Expenditure A/c: subscription income (balancing figure) | 1,27,800 | By Cash (Receipts & Payments A/c) | 1,20,000 |
| To Balance c/d (received in advance for 2024-25) | 4,000 | By Income & Expenditure A/c: written off | 800 |
| By Balance c/d (outstanding on 31 March 2024) | 15,000 | ||
| 1,41,800 | 1,41,800 |
| Dr | ₹ |
|---|---|
| To Balance b/d (outstanding on 1 April 2023) | 10,000 |
| To Income & Expenditure A/c: subscription income (balancing figure) | 1,27,800 |
| To Balance c/d (received in advance for 2024-25) | 4,000 |
| 1,41,800 | |
| Cr | ₹ |
| By Balance b/d (received in advance in 2022-23) | 6,000 |
| By Cash (Receipts & Payments A/c) | 1,20,000 |
| By Income & Expenditure A/c: written off | 800 |
| By Balance c/d (outstanding on 31 March 2024) | 15,000 |
| 1,41,800 |
Check: the same income built up by year.
| Particulars | ₹ |
|---|---|
| Cash received in 2023-24 that relates to 2023-24 (1,20,000 − 7,200 for 2022-23 − 4,000 for 2024-25) | 1,08,800 |
| Add: received in advance in 2022-23 for 2023-24 | 6,000 |
| Add: outstanding for 2023-24 (15,000 − 2,000 for 2022-23) | 13,000 |
| Subscription income for 2023-24 | 1,27,800 |
(ii) Presentation
Income & Expenditure Account for the year ended 31 March 2024 (extract)
| Expenditure | ₹ | Income | ₹ |
|---|---|---|---|
| To Subscriptions written off (2022-23 arrears) | 800 | By Subscriptions | 1,27,800 |
Balance Sheet as at 31 March 2024 (extract)
| Liabilities | ₹ | Assets | ₹ |
|---|---|---|---|
| Subscriptions received in advance (2024-25) | 4,000 | Subscriptions outstanding: 2022-23 ₹2,000 + 2023-24 ₹13,000 | 15,000 |
The write-off is an expense of the year, in the same way that bad debts are shown in the Income & Expenditure Account; it is not netted against the year's subscription income, which belongs to a different year's dues.
Result: subscription income for 2023-24 ₹1,27,800 · written off ₹800 · outstanding ₹15,000 (asset) · received in advance ₹4,000 (liability).
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Subscription Account, income ₹1,27,800 | 3 |
| 2 | Income & Expenditure Account extract | 1.5 |
| 3 | Balance Sheet extract | 1.5 |
| Total | 6 |
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