Q.Explain the accounting treatment of

These two one-time fees look similar on the surface — both are paid only once, on becoming a member — but the standard accounting treatment given to each is quite different.

(i) Entrance Fees, though technically a one-time capital-type receipt, recur every year in broadly similar amounts as new members join, so the generally accepted treatment — unless the question states otherwise — is to credit them in full to the Income and Expenditure Account as revenue income. (ii) Life Membership Fees substitute for an entire stream of future annual subscriptions and are always treated as a capital receipt …

1. Entrance Fees An Entrance Fee is a one-time fee charged when a person is first admitted as a member, in addition to the periodic subscription payable thereafter. Strictly speaking, since it is paid only once by each member, it has the character of a capital receipt. However, because most concerns admit new members every year, the total entrance fees collected tend to recur, in broadly comparable amounts, year after year — for this reason, the generally accepted and more common treatment (followed unless a question specifically instructs otherwise) is to credit the entire amount of Entrance Fees to the Income and Expenditure Account as revenue income of the year in which it is received.
2. Life Membership Fees …

Students often treat Entrance Fees and Life Membership Fees identically, since both are 'one-time' receipts paid on joining — but only Life Membership Fees are ALWAYS capitalised; Entrance Fees are conve …