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Question 4.6: A publishing business sells magazines on subscription. It ha...

A publishing business sells magazines on subscription. It has a financial year that ends on 30 June. Over the course of the last year it has received subscriptions totalling $500,000. Most annual subscriptions cover the calendar year. On 30 June it estimates that it has received subscriptions, totalling $200,000, which cover the period starting on 1 July. The necessary adjustment will be journalised as follows:

Date  Account name and narrative reference  Folio Debit side  Credit side 
June 30 Revenue from magazine subscriptions 200,000
Deferred revenue subscriptions 200,000
Year-end adjustment to reflect subscription received in advance
June 30  Revenue from magazine subscriptions 300,000
Profit and loss 300,000
Being transfer of revenue from magazine subscriptions to the profit and loss account
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After posting, the relevant account would appear as follows:

Revenue from magazine subscriptions
June 30 Deferred revenue—

subscriptions

 200,000 June 30  Cash over the year 500,000
June 30 Profit and loss 300,000
500,000 500,000

 

Deferred revenue—subscriptions
June 30 Revenue—subscriptions 200,000

 

Profit and loss
June 30  Subscription revenue 300,000

Revenues in arrears will be added to the appropriate revenue account and debited to an asset account called something like ‘Revenue in arrears’

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