Accounting Treatment for Subscriptions and Expenses

Subscriptions:

Not for Profit Organization collects fees from its member in form of a Subscription. Subscriptions are the membership fees paid by an organization’s members annually. Subscription is the main source of income for Not-for-Profit Organizations. Total Subscriptions received in the accounting period is shown in the Receipt and Payment Account. Subscription relating to the current accounting year whether received or not is shown on the income side of the Income & Expenditure Account. Subscription received in advance for the following year is shown on the liability side of the Balance Sheet, and Subscription not received, i.e., outstanding of the previous or current year is shown on Asset side of Balance Sheet.   

Format showing the calculation of Subscription:

It can also be calculated by preparing Subscription A/c:

Accounting Treatment of Subscriptions :

A. Through given Data/Figures:

Illustration: 

Subscription received during the year ended on 31st March, 2022 as:

There are 210 members in the Organization. The annual subscription for the members is ₹75 each member. Subscription outstanding for the year 2020-21 were ₹ 800.

From the following information calculate and show the treatment of the amount of subscription to be shown in Income and Expenditure A/c and Balance Sheet.

Solution: 

Subscription receivable for 2021-2022 = Number of Members X Annual Subscription

= 210 X 75

= ₹15,750                                                                                                

Subscriptions Outstanding (For Current Year) = Subscription Receivable – Subscription Received

= ₹15,750 – ₹11,750

= ₹4,000

Working Notes:

1. Subscription outstanding for 2020-2021 

= ₹800 – ₹550(received in 2021-2022)

=₹250

B. Through Receipt and Payment Account:

Illustration: 

From the Extract of the Receipts and Payments Account and additional information, compute the amount of subscriptions for the year ended on 31st March, 2022 of the Geeks Foundation and show the treatment in the Final Accounts of the Organization:

Additional Information:

1. The annual subscription fee is ₹200 each. There are 275 members in the Evergreen Organization.

2. Outstanding Subscription on 1.4.2021 were ₹1,300.

Solution:

Expenses:

Not-for-Profit Organizations make payments related to its expenses, which are shown on the Payments side of Receipt & Payment A/c. Expenses spent on operation of the organization, i.e., expenses, which are revenue in nature and belong to current year are recorded in Income and Expenditure A/c. Sundry expenses like Salary, Rent & Taxes, Electricity charges, Printing & Stationery, etc., are some examples.

Statement showing Treatment for Expenses:

Accounting Treatment of Expenses:

A. Through given Data/Figures:

Illustration: 

From the following information, calculate and show the treatment of expenses :

Geeks Foundation made miscellaneous expenses during the year ended on 31st March, 2021, amounting to ₹1,20,000. Prepaid and unpaid expenses were:

Solution:

B. Through Receipt and Payment Account:

Illustration: 

From the following extract of Receipts and Payment Account of Geeks Foundation, compute the treatment of salaries for the year ending on 2021-2022 :

Additional Information:

1. Salary paid in advance in 2020-21 amounts to ₹ 4,150
2. Salary unpaid on 2020-21 is ₹1,300
3. Prepaid Salary in 2021-22 amounts to ₹1,450
4. Outstanding Salary in 2021-22 is ₹1,000

Solution: