Treatment of Subscriptions

Subscription is the periodic amount paid by members to remain members of the organization, and is usually its main source of income. Because the Receipts and Payments Account shows only the subscription actually received in cash during the year, while the Income and Expenditure Account must show only the subscription relating to the current year, an adjustment is almost always necessary.

Why the difference arises

• Outstanding subscription — subscription that fell due in a year but was not received by its end — is an asset (a debtor) of that year, shown in the Balance Sheet, and is added to the year's income when it is finally received in a later year.
• Subscription received in advance — amount received during the year that relates to a future year — is a liability, shown in the Balance Sheet, and must be excluded from the current year's income.

Formula

Subscription for the current year (to be shown in the Income and Expenditure Account) is found as:

• Subscription received during the year (as per the Receipts and Payments Account)
• plus Outstanding subscription at the end of the current year (earned this year, not yet received)
• minus Outstanding subscription at the beginning of the current year (earned last year, received this year)
• plus Advance subscription at the beginning of the current year (received last year for this year)
• minus Advance subscription at the end of the current year (received this year for next year) …