Q.During the year ended 31.3.2025, a sports club received entrance fees of ₹18,000 from new members. State, with reason, how this amount should be treated in the final accounts of the club, in the absence of any instruction in the question.
Reasoning. Entrance fee (also called admission fee) is paid once by each member on joining the club, so from a single member's point of view it looks like a one-time, capital-type receipt. However, since the club admits new members in every accounting year as part of its normal, routine activity, the flow of entrance-fee income recurs year after year at the organization's level, even though no individual member repeats the payment. The generally accepted treatment therefore is to treat entrance fees as a revenue receipt, unless the question specifically states that a certain amount or percentage is to be capitalized (added to the Capital Fund) — in that case, only that stated instruction is followed instead of the general rule.
Treatment. The full ₹18,000 is credited to the Income and Expenditure Account for the year ended 31.3.2025 as 'Entrance Fees'. It does not appear anywhere in the Balance Sheet, since it is not a capital item.
₹18,000 is credited in full to the Income and Expenditure Account as revenue income, since no instruction to capitalize it was given.
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