Subscription Adjustments in Not-for-Profit Organisation Accounts

Subscription adjustments in not-for-profit organisation accounts look small, but they can quietly change the whole answer.

The Receipts and Payments Account may show one line:

Subscriptions received during the year: Rs. 96,000

But the Income and Expenditure Account does not ask, “How much cash came in?”

It asks a better question:

How much subscription income belongs to this year?

That one question is the heart of the topic.

In not-for-profit accounts, subscription is usually regular income from members. A club, society, association, library, or sports organisation may collect it monthly, quarterly, or yearly. But the amount received during the year may include money from last year, money for this year, and even money collected in advance for next year.

So we adjust it.

Once this is clear, the adjustment becomes logical instead of mechanical.

Why Subscription Needs Adjustment

A not-for-profit organisation prepares its final accounts on the accrual basis.

That means income is matched with the year to which it belongs, even if the cash has been received earlier or later.

For subscriptions, this creates four common adjustments:

Adjustment	Simple meaning
Outstanding subscription at the beginning	Amount due from last year, collected or still due this year
Outstanding subscription at the end	Amount earned this year, but not yet received
Subscription received in advance at the beginning	Amount received last year, but belonging to this year
Subscription received in advance at the end	Amount received this year, but belonging to next year

If you understand these four lines, you can solve most subscription questions.

The confusion usually starts because the Receipts and Payments Account records cash. It does not separate the cash by year.

The Income and Expenditure Account is different. It includes only the income of the current year.

The Main Formula

Use this formula when the question gives subscriptions received during the year along with opening and closing adjustments:

Subscription income for the current year
= Subscriptions received during the year
+ Outstanding subscription at the end
+ Subscription received in advance at the beginning
- Outstanding subscription at the beginning
- Subscription received in advance at the end

The same formula can be shown in a cleaner table:

Particular	Treatment
Subscriptions received during the year	Add
Outstanding subscription at the end	Add
Subscription received in advance at the beginning	Add
Outstanding subscription at the beginning	Less
Subscription received in advance at the end	Less

Now let us understand why each item is added or deducted.

Why We Add Closing Outstanding Subscription

Closing outstanding subscription means the members owe subscription for the current year, but the organisation has not yet received the cash.

Example:

Subscription due for this year but not received: Rs. 8,000

This Rs. 8,000 belongs to the current year. It has been earned by the organisation because members were supposed to pay it for this year’s membership.

So it is added to subscription income.

It is also shown as an asset in the closing Balance Sheet because it is receivable.

Item	Treatment
Closing outstanding subscription	Add to subscription income
Closing Balance Sheet	Show as asset

Think of it as income that has already been earned, but the cash has not arrived yet.

Why We Add Opening Advance Subscription

Opening advance subscription means the organisation received cash last year, but that cash belonged to the current year.

Example:

Subscription received in advance on 1 April: Rs. 5,000

This amount was not income of the previous year. It was kept aside because it related to this year.

Now that the current year has arrived, it becomes this year’s income.

So it is added.

Item	Treatment
Opening advance subscription	Add to subscription income
Opening Balance Sheet	It was shown as liability in the previous year’s closing Balance Sheet

This is one of the most missed adjustments because students see the word “advance” and immediately think it should be deducted. That is true for closing advance, not opening advance.

Why We Deduct Opening Outstanding Subscription

Opening outstanding subscription means the amount was due from members at the beginning of the year.

That usually means it related to the previous year.

If this amount is received during the current year, it will appear in the Receipts and Payments Account. But it is not income of the current year. It was already treated as income last year.

So it must be deducted from current year’s subscription income.

Example:

Outstanding subscription on 1 April: Rs. 6,000

If this Rs. 6,000 is included in cash received during the year, it must be removed while calculating this year’s income.

Item	Treatment
Opening outstanding subscription	Deduct from subscription income
Opening Balance Sheet	It appeared as an asset at the beginning

The easiest way to remember it is this:

Opening outstanding is old income being collected now. Collection is new, but income is old.

Why We Deduct Closing Advance Subscription

Closing advance subscription means the organisation received cash during the current year, but the amount belongs to the next year.

Example:

Subscription received for next year: Rs. 7,000

The cash has arrived, so it is shown in the Receipts and Payments Account. But it is not income of the current year.

So it is deducted.

It is also shown as a liability in the closing Balance Sheet because the organisation has received money for a future period.

Item	Treatment
Closing advance subscription	Deduct from subscription income
Closing Balance Sheet	Show as liability

This is similar to a promise. The organisation has accepted money for next year’s membership, so it cannot treat the full amount as this year’s income.

A Full Solved Example

Let us solve a complete question.

Subscriptions received during the year: Rs. 84,000
Outstanding subscription on 1 April: Rs. 6,000
Outstanding subscription on 31 March: Rs. 9,000
Subscription received in advance on 1 April: Rs. 5,000
Subscription received in advance on 31 March: Rs. 7,000

Calculate the subscription income to be shown in the Income and Expenditure Account.

Particular	Amount
Subscriptions received during the year	Rs. 84,000
Add: Outstanding subscription at the end	Rs. 9,000
Add: Subscription received in advance at the beginning	Rs. 5,000
Less: Outstanding subscription at the beginning	Rs. 6,000
Less: Subscription received in advance at the end	Rs. 7,000
Subscription income for the year	Rs. 85,000

So Rs. 85,000 will be credited to the Income and Expenditure Account.

The closing Balance Sheet will show:

Item	Side	Amount
Outstanding subscription	Assets	Rs. 9,000
Subscription received in advance	Liabilities	Rs. 7,000

The Subscription Account Method

Some students prefer the formula. Some teachers prefer a Subscription Account.

Both methods lead to the same answer.

A Subscription Account is prepared to find the income transferred to the Income and Expenditure Account.

Here is the broad idea:

Debit side of Subscription Account	Credit side of Subscription Account
Opening outstanding subscription	Opening advance subscription
Bank, if subscription is refunded	Bank, for subscription received
Closing advance subscription	Closing outstanding subscription
Income and Expenditure Account, balancing figure

The balancing figure is usually the subscription income for the current year.

This method is useful when the question has many scattered details. It helps you place each item on the correct side instead of trying to hold everything in your head.

How to Read a Question Without Getting Trapped

A subscription question often hides the answer in small phrases.

Look carefully for these words:

• outstanding
• accrued
• due but not received
• received in advance
• unearned
• for previous year
• for next year
• arrears
• number of members
• annual subscription per member

The words “received” and “income” are not the same.

If the question says “subscriptions received”, it is giving cash information.

If the question asks for “subscription income”, it wants the adjusted amount for the year.

When Number of Members Is Given

Sometimes the question gives:

Number of members: 200
Annual subscription per member: Rs. 500

In this case, the current year’s subscription income may be calculated directly:

200 members x Rs. 500 = Rs. 1,00,000

This amount belongs to the current year.

Then other information helps you find outstanding or advance amounts for the Balance Sheet, or reconcile the cash received.

This method is especially useful when the question gives member details instead of a simple subscription-received figure.

Information given	Best first step
Cash received plus opening and closing adjustments	Use the formula
Number of members and annual subscription	Calculate subscription due for the year
Year-wise subscriptions received	Separate previous year, current year, and next year

When Year-Wise Subscription Receipts Are Given

A question may show subscription received like this:

Year for which subscription was received	Amount
Previous year	Rs. 4,000
Current year	Rs. 92,000
Next year	Rs. 6,000
Total received	Rs. 1,02,000

Here the answer becomes easier.

The previous year amount is not current year income. The next year amount is also not current year income.

The current year amount is Rs. 92,000.

But before finalising, check whether any current year subscription is still outstanding at the end.

If current year outstanding subscription is Rs. 8,000, then:

Subscription income for the year = Rs. 92,000 + Rs. 8,000 = Rs. 1,00,000

The closing Balance Sheet will show:

Item	Side	Amount
Outstanding subscription	Assets	Rs. 8,000
Subscription received for next year	Liabilities	Rs. 6,000

The previous year amount is simply old cash collection. It does not become current year income again.

Balance Sheet Treatment

The Income and Expenditure Account shows the adjusted subscription income.

The Balance Sheet shows what is still receivable or what has been received too early.

Use this simple rule:

Item at the end of the year	Balance Sheet treatment
Subscription outstanding	Asset
Subscription received in advance	Liability

Why is outstanding subscription an asset?

Because the organisation has the right to receive it.

Why is advance subscription a liability?

Because the organisation has received money for a future period.

This Balance Sheet treatment is important because many students calculate the correct income but forget the related asset or liability.

Journal Entries Behind the Adjustment

You may not always need journal entries in the final answer, but they help you understand the logic.

For closing outstanding subscription:

Outstanding Subscription A/c Dr.
    To Subscription A/c

For subscription received in advance at the end:

Subscription A/c Dr.
    To Subscription Received in Advance A/c

For transferring subscription income to the Income and Expenditure Account:

Subscription A/c Dr.
    To Income and Expenditure A/c

These entries show why outstanding subscription increases income, while closing advance reduces it.

Common Mistakes in Subscription Adjustments

Mistake 1: Treating Cash Received as Final Income

If the question says subscriptions received were Rs. 96,000, that is only the starting point.

Check whether it includes old dues, future advances, or misses current year dues.

Mistake 2: Reversing Opening and Closing Advance

Opening advance is added because it belongs to the current year.

Closing advance is deducted because it belongs to the next year.

This is the pair that students often reverse.

Mistake 3: Forgetting the Closing Balance Sheet

Closing outstanding subscription is an asset.

Closing advance subscription is a liability.

Do not stop after the Income and Expenditure Account if the question also asks for the Balance Sheet.

Mistake 4: Counting Previous Year Arrears as Current Income

If members paid old dues during the current year, the cash is current but the income is not.

That amount should not be counted again as this year’s income.

Mistake 5: Ignoring the Number of Members

When the question gives number of members and annual subscription, use it.

It may be the cleanest way to calculate current year’s subscription income.

A Quick Practice Question

Try this before reading the answer.

Subscriptions received during the year: Rs. 1,20,000
Outstanding subscription at the beginning: Rs. 10,000
Outstanding subscription at the end: Rs. 14,000
Subscription received in advance at the beginning: Rs. 8,000
Subscription received in advance at the end: Rs. 12,000

Find the subscription income for the current year.

Solution:

Particular	Amount
Subscriptions received during the year	Rs. 1,20,000
Add: Outstanding subscription at the end	Rs. 14,000
Add: Subscription received in advance at the beginning	Rs. 8,000
Less: Outstanding subscription at the beginning	Rs. 10,000
Less: Subscription received in advance at the end	Rs. 12,000
Subscription income for the year	Rs. 1,20,000

In this question, the additions and deductions bring the answer back to Rs. 1,20,000. That will not always happen. It happened here only because the total additions and deductions were equal.

Closing Balance Sheet:

Item	Side	Amount
Outstanding subscription	Assets	Rs. 14,000
Subscription received in advance	Liabilities	Rs. 12,000

Final Revision Chart

Use this chart for quick revision before solving questions:

Item	Income and Expenditure Account	Closing Balance Sheet
Subscription received during the year	Start with it	No direct treatment
Opening outstanding subscription	Deduct	Already an opening asset
Closing outstanding subscription	Add	Asset
Opening advance subscription	Add	Already an opening liability
Closing advance subscription	Deduct	Liability

The pattern is simple:

• Add amounts that belong to the current year but are not fully included in current cash.
• Deduct amounts included in current cash but belonging to another year.
• Show closing receivables and closing advances in the Balance Sheet.

If you follow this rhythm, subscription adjustments become one of the most reliable parts of not-for-profit organisation accounts.

Frequently Asked Questions

1. What is subscription in not-for-profit organisation accounts?

Subscription is the regular amount paid by members to an organisation, usually for membership during a particular year. It is generally treated as revenue income after adjusting for outstanding and advance amounts.

2. Is subscription received always shown in the Income and Expenditure Account?

No. The Income and Expenditure Account shows subscription income for the current year, not simply the cash received. Subscription received for previous years or next year must be adjusted.

3. Why is outstanding subscription at the end added?

It is added because it belongs to the current year. The cash has not been received yet, but the income has been earned.

4. Why is outstanding subscription at the beginning deducted?

It is deducted because it usually belongs to the previous year. If it is collected during the current year, the cash is current but the income is old.

5. Why is subscription received in advance at the beginning added?

It is added because the cash was received earlier, but the income belongs to the current year.

6. Why is subscription received in advance at the end deducted?

It is deducted because the cash has been received this year, but the income belongs to the next year.

7. Where is closing outstanding subscription shown in the Balance Sheet?

Closing outstanding subscription is shown as an asset because the organisation has the right to receive that amount.

8. Where is closing advance subscription shown in the Balance Sheet?

Closing advance subscription is shown as a liability because the organisation has received money for a future period.

9. What is the easiest formula for subscription adjustment?

Start with subscriptions received during the year. Add closing outstanding and opening advance. Deduct opening outstanding and closing advance.

10. Should I use the formula method or the Subscription Account method?

Use the method expected in your class or question. The formula method is faster for simple questions, while the Subscription Account method is helpful when the information is detailed or scattered.