While teaching accounting one of my students asked what is the journal of subscription income?
The question was asked in the context of income and expenditure account which is prepared to find out the surplus or deficit of non profit organisations.
The simple answer of this question could be one line journal entry but on that way the curiosity of “what” would be satisfied but the urge to know “how” would remain in the mind of accounts aspirants. This made me the need to write in details about that “how” part and also “what” part.
So here it is :
First of all, the entry would be :
Bank account dr
To subscription account
And
Subscription account dr
To income & expenditure account
Few of the viewers can go from here as they were looking for journal entry only and not have time to go through reason for others plz continue reading:
Reasons:
First of all we need to know what is subscription?
It is a regular payment made by members of an organisation to get some services or to be a part of that organisation . For example the amount we paid to an organisation to receive monthly magazine is a type of subscription.
Now if we look at that organisation point of view who is providing us magazine and receiving subscription from us, the money it got is their income.
Now income should be credited as we know from “ golden rule of accounting “
That is why subscription is credited
And bank is debited as we know from golden rule of personal account “ debit the receiver credit the giver”
When member is depositing money in the bank account of that organisation, bank is the receiver
Thus our rule hold good here, entry is fully justified.
Now so far, we have understood the reason behind First entry
Bank account dr
To subscription account
Now one thing should be noted that income and expenditure accounts is a nominal account whose main purpose is to find profit or loss.
So closing entry should be needed
That is why subscription account is debited and income and expenditure account is credited.
Hopefully you all got the answers and your queries are satisfied!!
If you have any doubts plz write in comments box below!
The question was asked in the context of income and expenditure account which is prepared to find out the surplus or deficit of non profit organisations.
The simple answer of this question could be one line journal entry but on that way the curiosity of “what” would be satisfied but the urge to know “how” would remain in the mind of accounts aspirants. This made me the need to write in details about that “how” part and also “what” part.
So here it is :
First of all, the entry would be :
Bank account dr
To subscription account
And
Subscription account dr
To income & expenditure account
Few of the viewers can go from here as they were looking for journal entry only and not have time to go through reason for others plz continue reading:
Reasons:
First of all we need to know what is subscription?
It is a regular payment made by members of an organisation to get some services or to be a part of that organisation . For example the amount we paid to an organisation to receive monthly magazine is a type of subscription.
Now if we look at that organisation point of view who is providing us magazine and receiving subscription from us, the money it got is their income.
Now income should be credited as we know from “ golden rule of accounting “
That is why subscription is credited
And bank is debited as we know from golden rule of personal account “ debit the receiver credit the giver”
When member is depositing money in the bank account of that organisation, bank is the receiver
Thus our rule hold good here, entry is fully justified.
Now so far, we have understood the reason behind First entry
Bank account dr
To subscription account
Now one thing should be noted that income and expenditure accounts is a nominal account whose main purpose is to find profit or loss.
So closing entry should be needed
That is why subscription account is debited and income and expenditure account is credited.
Hopefully you all got the answers and your queries are satisfied!!
If you have any doubts plz write in comments box below!
