Calculating Subscription Income for Clubs

When preparing the Income and Expenditure Account for a club, the aim is to show the income and expenses for a specific accounting period, based on the accrual concept. This means that only income and expenses related to the current year are included, regardless of whether cash has been received or paid.

Subscriptions are a major source of income for non-profit organizations like clubs. The amount of subscription to be shown in the Income and Expenditure Account for a particular year is the amount related to that year, whether received during the year or outstanding at the end of the year, less any amount received in advance for future years or relating to past years.

Analyzing the Given Subscription Information

We are given the following information about subscriptions received by the club during the year 2016-17:

• Total subscription received during 2016-17: ₹20,000
• Amount relating to 2015-16 (previous year): ₹3,000
• Amount relating to 2017-18 (next year): ₹2,000
• Amount outstanding at the end of 2016-17 (for current year): ₹6,000

Our goal is to find the amount of subscription income that belongs to the year 2016-17 and should be shown in the Income and Expenditure Account for 2016-17.

Step-by-Step Calculation of Subscription Income

We start with the total subscription received during the year 2016-17 and make adjustments to find the amount related only to 2016-17.

1. Start with total cash received: The total cash received for subscriptions during 2016-17 is ₹20,000. This amount includes subscriptions for the current year, past years, and future years.
2. Subtract subscription for the previous year: The ₹3,000 received for 2015-16 is income of the previous year, not 2016-17. So, this amount must be subtracted from the total received.
3. Subtract subscription for the next year: The ₹2,000 received for 2017-18 is income of the next year, received in advance during 2016-17. This is not income for 2016-17 and must be subtracted.
4. Add outstanding subscription for the current year: The ₹6,000 outstanding at the end of 2016-17 relates to the year 2016-17 itself. Although not received in cash during 2016-17, it is income earned for this year and must be added based on the accrual concept.

Let's perform the calculation:

Conclusion on Subscription Income Calculation

Based on the calculation, the amount of subscription income to be shown in the Income and Expenditure Account for the year 2016-17 is ₹21,000. This figure represents the income earned by the club from subscriptions specifically for that accounting period, adhering to the accrual principle.

Revision Table: Key Adjustments for Subscriptions

Additional Information: Income and Expenditure Account

The Income and Expenditure Account is prepared by non-profit organizations to determine the surplus (excess of income over expenditure) or deficit (excess of expenditure over income) for a specific period. It is similar to the Profit and Loss Account of a business concern.

• It is prepared on the accrual basis of accounting.
• It records incomes and expenditures of a revenue nature only. Capital receipts and payments are excluded.
• It includes all income and expenses relating to the accounting period, whether cash is received or paid during that period or not.
• Items like depreciation, outstanding expenses, and income received in advance or arrears are adjusted.
• The balance of this account represents Surplus or Deficit, which is then transferred to the Capital Fund.

This is different from the Receipts and Payments Account, which is a summary of cash and bank transactions during a period, similar to a cash book, prepared on a cash basis.