Subscription income is the amount that belongs to the year, not the cash received. Arrears and advance, both opening and closing, explain the difference.
This lesson is part of clubs and societies accounts. It builds on the cash and accrual idea in distinguishing receipts and payments from income and expenditure.
How does the subscriptions account work?
Set out a ledger account. Opening arrears go on the debit side, because members owe the club. Opening advance goes on the credit side, because the club owes the service.
Cash received is a credit. Closing arrears is a credit and closing advance is a debit, since these are carried down. The income for the year is the balancing figure on the debit side.
Worked example: Kelab Silat Bestari
During the year the club received RM4 800 in subscriptions. The balances are below.
- Opening arrears: RM300.
- Opening advance: RM150.
- Closing arrears: RM500.
- Closing advance: RM250.
| Side | Details | RM |
|---|---|---|
| Dr | Balance b/d (arrears) | 300 |
| Dr | Income and expenditure (balancing figure) | 4 900 |
| Dr | Balance c/d (advance) | 250 |
| Cr | Balance b/d (advance) | 150 |
| Cr | Cash received | 4 800 |
| Cr | Balance c/d (arrears) | 500 |
Credit side total = 150 + 4 800 + 500 = 5 450. Other debits = 300 + 250 = 550. Income = 5 450 − 550 = RM4 900.
Cross-check by adjusting the cash: 4 800 − 300 + 500 − 250 + 150 = 4 900. Suppose the club has 98 members paying RM50 a year. Then 98 × 50 = RM4 900, so the figure is sensible.
The mistake that costs marks
The slip is to use the RM4 800 cash figure as the income. That ignores the money that belongs to other years.
| Step | Wrong | Right |
|---|---|---|
| Income for the year | 4 800 | 4 900 |
| Closing arrears | Left out | Current asset, 500 |
| Closing advance | Left out | Current liability, 250 |
The fix is to build the account, not the quick sum. A ledger account shows every balance and keeps the sides right.
Does the direction of each adjustment matter?
Yes. Think of each one as a question: does this amount belong to this year?
- Opening arrears paid this year: belongs to last year, so subtract.
- Closing arrears: belongs to this year, so add.
- Closing advance: belongs to next year, so subtract.
- Opening advance: belongs to this year, so add.
Check yourself
Opening arrears are RM200 and opening advance is RM100. Cash received is RM3 600. Closing arrears are RM300 and closing advance is RM150. Find the subscription income.
Answer
Credit side: 100 + 3 600 + 300 = 4 000. Other debits: 200 + 150 = 350.
Income = 4 000 − 350 = RM3 650.
Cross-check: 3 600 − 200 + 300 − 150 + 100 = 3 650.
What to study next
Continue with accounting for trading activities. For a teacher to work through your ledger accounts, see online one-to-one Accounting tuition.