Membership Subscription Account

Explanation

Members' subscription (yuran ahli) is the periodic fee charged to members of a club or association in return for membership and the use of the facilities provided. For a non-profit organisation, subscriptions are usually the main source of income (revenue) that covers the running costs of the club. Because subscriptions are received periodically and are not always paid in the exact year to which they relate, they must be adjusted on the accruals basis so that only the amount earned for the current financial year is transferred to the Income and Expenditure Account. This is the main purpose of preparing the Members' Subscription Account (Akaun Yuran Ahli).

This Standard requires students to distinguish several key terms. Current subscription (yuran semasa) is the amount earned for the current financial year; this is the figure ultimately transferred to the income side of the Income and Expenditure Account. Subscription in arrears (yuran belum terima) is the current year's subscription that members have not yet paid at the balance sheet date; it is a current asset because members still owe the club. In contrast, subscription in advance (yuran belum terperoleh) is subscription paid by members for a future year; because the membership service has not yet been given, it is a current liability of the club.

Bad or irrecoverable subscription (yuran lapuk) is subscription in arrears that the club has decided cannot be collected, for example because a member has left the club or refuses to pay. Bad subscription is written off from the Members' Subscription Account (credited) and reported as an expense on the debit side of the Income and Expenditure Account. This is similar to bad debts in a profit-making business, but applied to members' arrears. Students must distinguish subscription in arrears (an asset still expected to be collected) from bad subscription (arrears already written off).

To prepare the Members' Subscription Account, entries are arranged in a T-account. On the debit side are recorded: balance b/d for subscription in arrears (opening arrears, an asset), balance c/d for subscription in advance (closing advance, a liability carried down), and the transfer of current subscription to the Income and Expenditure Account. On the credit side are recorded: balance b/d for subscription in advance (opening advance), subscription received through Bank/Cash during the year, bad subscription written off, and balance c/d for subscription in arrears (closing arrears carried down). Both sides must balance, and the balancing figure is normally the current subscription transferred to the Income and Expenditure Account.

Once the Members' Subscription Account is prepared, its effects are shown in the club's financial statements. Current subscription appears as income in the Income and Expenditure Account, while bad subscription appears as an expense. In the Statement of Financial Position, subscription in arrears is shown as a current asset and subscription in advance as a current liability. Understanding the link between the subscription account, the income and expenditure account, and the statement of financial position is essential, because placing arrears or advance in the wrong place will make the reported surplus or deficit inaccurate.

Worked examples

Practice

Exam tips

Key terms

Members' subscription

Periodic fee charged to club or association members; usually the organisation's main revenue.

Subscription in arrears

Current year subscription unpaid by members at the balance sheet date; a current asset.

Subscription in advance

Subscription paid by members for a future year; a current liability.

Bad subscription

Arrears written off as uncollectable; an expense in the Income and Expenditure Account.

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 5

Other Content Standards in this chapter