Question 3 OR (b)
Subscriptions over five years: arrears, advances and a write-off
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 3 OR (b) · 6 marksIn what way will you deal with the items below when drawing up the Income and Expenditure Account for the year that ends on 31st March,2024 and the Balance Sheet as on that date?
Subscription outstanding on 31.03.2023: Rs 11,400 (of which Rs. 600 is for 2021-2022). Subscription received in advance on 31.03.2023: Rs. 3,600 (of which Rs. 240 is for 2024-2025).
Subscription received in 2023-2024: for 2021-2022 Rs 480, for 2022-2023 Rs 10,680, for 2023-2024 Rs. 1,61,280, for 2024-2025 Rs 4,800, for 2025-2026 Rs. 1,440.
Subscription outstanding on 31.03.2024: Rs. 8,400.
Subscription of2021-2022 written off in 2023-2024 Rs. 60.
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
What the paper leaves open
- The subscriptions outstanding at the year end (₹8,400 in our version) are read as all arrears at that date, including the parts of the two earlier years still unpaid (₹60 and ₹120). Subscription income for the year is then ₹1,72,860. If ₹8,400 were this year's arrears alone, with the older ₹180 still due on top, the income would be ₹1,73,040.
- The amount written off belongs to the earliest year; it is charged to the Income and Expenditure Account as a loss, not deducted from this year's income. The misprint "of2021-2022" is kept as printed.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Subscription income for 2023-24 WN1, WN2 2 marks 3 min
- 2 Write-off charged to the Income and Expenditure Account 1 mark 2 min
- 3 Outstanding subscriptions in the Balance Sheet, by year 1 mark 2 min
- 4 Subscriptions received in advance in the Balance Sheet, by year 1 mark 2 min
- 5 Subscription Account balancing the whole 1 mark 1 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
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 belongs to 2023-24 is income of the year. Amounts received for earlier years settle arrears already recorded as assets, and amounts received for later years are a liability, subscriptions received in advance. Through the Subscriptions Account, last year's advance is transferred in, last year's arrears are brought to its debit, this year's amount still due is brought into account, and next year's subscription received is carried to Subscriptions Received in Advance. The Income and Expenditure Account takes in all income of the year, received and accrued, and losses such as bad debts are charged in it.
WN1: Subscription income for 2023-24 (method as in the DU text's worked example)
| Particulars | ₹ |
|---|---|
| Received in 2023-24 for 2023-24 | 1,61,280 |
| Add: received in advance last year for 2023-24 (3,600 − 240) | 3,360 |
| Add: still due for 2023-24 on 31-3-2024 (WN2) | 8,220 |
| Subscription income for 2023-24 | 1,72,860 |
WN2: What the closing arrears of ₹8,400 consist of
| Year | Working | ₹ |
|---|---|---|
| 2021-22 | 600 − received 480 − written off 60 | 60 |
| 2022-23 | 10,800 (11,400 − 600) − received 10,680 | 120 |
| 2023-24 | balance of the total arrears | 8,220 |
| Total arrears on 31-3-2024 | 8,400 |
Subscription Account for the year ended 31st March 2024
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Balance b/d (subscription outstanding) | 11,400 | By Balance b/d (received in advance) | 3,600 |
| To Income and Expenditure A/c (income for the year) | 1,72,860 | By Cash (received in 2023-24) | 1,78,680 |
| To Balance c/d (received in advance) | 6,480 | By Income and Expenditure A/c (2021-22 written off) | 60 |
| By Balance c/d (subscription outstanding) | 8,400 | ||
| 1,90,740 | 1,90,740 |
| Dr | ₹ |
|---|---|
| To Balance b/d (subscription outstanding) | 11,400 |
| To Income and Expenditure A/c (income for the year) | 1,72,860 |
| To Balance c/d (received in advance) | 6,480 |
| 1,90,740 | |
| Cr | ₹ |
| By Balance b/d (received in advance) | 3,600 |
| By Cash (received in 2023-24) | 1,78,680 |
| By Income and Expenditure A/c (2021-22 written off) | 60 |
| By Balance c/d (subscription outstanding) | 8,400 |
| 1,90,740 |
Treatment in the final accounts
- Income and Expenditure Account (year ended 31-3-2024): on the income side, Subscriptions ₹1,72,860. On the expenditure side, Subscription written off (2021-22) ₹60, charged as a loss.
- Balance Sheet as on 31-3-2024, assets side: Subscription outstanding ₹8,400 (2021-22 ₹60; 2022-23 ₹120; 2023-24 ₹8,220).
- Balance Sheet as on 31-3-2024, liabilities side: Subscription received in advance ₹6,480:
| Year | Working | ₹ |
|---|---|---|
| 2024-25 | 240 (received in 2022-23) + 4,800 (received in 2023-24) | 5,040 |
| 2025-26 | received in 2023-24 | 1,440 |
| Total received in advance | 6,480 |
The other reading (paper note). If ₹8,400 were this year's arrears alone, with the older ₹180 still due on top, income would be ₹1,61,280 + ₹3,360 + ₹8,400 = ₹1,73,040, and outstanding subscriptions in the Balance Sheet ₹8,580.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Subscription income for 2023-24 (WN1, WN2) | 2 |
| 2 | Write-off charged to the Income and Expenditure Account | 1 |
| 3 | Outstanding subscriptions in the Balance Sheet, by year | 1 |
| 4 | Subscriptions received in advance in the Balance Sheet, by year | 1 |
| 5 | Subscription Account balancing the whole | 1 |
| Total | 6 |
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