Subscriptions account format

The standard format

1. Balance b/d: arrears owing and advances brought forward
2. Add: subscriptions received during the year
3. Adjust: arrears and advances at the year end
4. Income for the year transferred to income and expenditure

Filled example

Notes

• Subscriptions in advance are a liability; subscriptions in arrears are an asset.
• Only the income earned in the year reaches the income and expenditure account.
• In this example nothing was owing or paid in advance at the start. Otherwise, deduct opening arrears and add opening advances.
• Arrears may be written off if members are not expected to pay.

Building and reading this format

A club is judged on the income that belongs to the year, not on the cash it receives. Members rarely pay exactly on time. Some pay in advance and others fall into arrears.

So the cash received is never the true subscription income. The subscriptions account turns cash received into income earned.

It has two sides, and its balances have specific meanings. Start with the opening balances. Subscriptions owed by members at the start (arrears) are an asset and go on the debit side.

Subscriptions paid in advance at the start are a liability and go on the credit side. Suppose a club begins the year with RM300 owing and RM120 paid in advance. The RM300 is a debit balance brought down and the RM120 is a credit balance brought down.

Cash received from members during the year, say RM4,500, goes on the credit side. The matching debit is in the cash book.

Now add the closing balances. Subscriptions still owing at the year end are an asset. They are carried down on the credit side and brought down as a debit for next year.

Subscriptions paid in advance at the year end are a liability. They are carried down on the debit side and brought down as a credit. The balancing figure is the subscription income for the year, and it is transferred to the income and expenditure account.

Take a club that received RM4,500 in cash, with opening arrears of RM300 and opening advances of RM120. At the year end, RM400 is owing and RM150 is paid in advance. The income is 4,500 − 300 + 120 + 400 − 150 = RM4,570.

The account removes opening arrears and closing advances. It brings in opening advances and closing arrears. Now you can explain to a committee why income and the bank figure disagree.

Marks are mostly lost by putting arrears and advances on the wrong side, because they reverse between opening and closing. Entering cash received on the debit side reverses the whole account.

Transferring the cash figure to the income and expenditure account, instead of the balancing figure, ignores the adjustments. Forgetting to bring the balances down for next year also loses marks.

Use this routine. Opening arrears are a debit and opening advances are a credit. Cash received is a credit.

Closing arrears are carried down on the credit side and closing advances on the debit side. Then strike the balance that goes to the income and expenditure account. Label each balance as owing or prepaid, and date it.

If you often put arrears and advances on the wrong side, we can help. One of our teachers can work through a few club accounts with you until the logic is clear. Book a trial class

Related how-to

• How to prepare a subscriptions account
• How to prepare an income and expenditure account

These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.