Concept:Subscription received before it is earned is treated as a liability in the balance sheet.
Explanation:The amount of
₦1,000 appears on the receipts side as "subscription (2000)".
This means members paid this money for the year 2000, not for the current year 1999.
The subscription for 1999 is recorded as
₦7,500, which is the income for the period.
At
31/12/99, the club has received the cash but has not yet earned it fully.
The club still owes the members the benefit of service for the year 2000.
Therefore, this amount is an income received in advance, also called deferred income.
In the balance sheet, income received in advance is shown as a current liability.
It is not an asset, because it does not provide a future economic benefit to the club now.
It is not capital, because it relates to subscription dues for a future period.
It is not the total subscription income, since only the part for 1999 is earned revenue.
Hence, the
₦1,000 represents a liability to the organisation.
Answer:B. Liability