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CMA Foundation · Fundamentals of Financial and Cost Accounting · Financial Statements of a Not-for-Profit Organisation

Harmony Club had 400 members, each paying an annual subscription of ₹1,500. During 2024-25 it collected ₹5,70,000 for the year's subscriptions, and also ₹20,000 as arrears for the previous year. Opening subscriptions outstanding were ₹40,000, and the club received ₹15,000 in advance for 2025-26. Of the 400 members, the club decides to treat the ₹25,000 still due from a member who has left as irrecoverable and write it off. What is the subscription income credited to the Income and Expenditure Account for 2024-25, ignoring the write-off as a separate expense?

Subscription income is ₹6,00,000, being 400 members at ₹1,500 each. Income is recognised on accrual basis for the year, so arrears collected for the previous year and advances received for the next year are excluded, and the write-off is shown separately as a loss.

  1. A₹6,00,000Correct
  2. B₹5,85,000
  3. C₹5,70,000
  4. D₹6,25,000

Explanation

Subscriptions earned for the year = 400 × 1,500 = ₹6,00,000, because income is on an accrual basis irrespective of cash received. Advance of ₹15,000 relates to the next year and arrears of ₹20,000 relate to the previous year, so neither changes current income. The write-off is a separate expense. ₹5,85,000 wrongly deducts the advance.

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