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Numerical Example of Subscription

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Question

Subscription received in advance is classified in the Balance Sheet of a club as ___________.

A

Tangible asset

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B

Intangible asset

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C

Fixed asset

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D

Current liability

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Solution

The correct option is C Current liability
Under the accrual method of accounting, income that is received in advance is a liability because the company that received the money has not yet earned it and it has an obligation (a liability) to deliver the related goods or services in the future.
Thus, subscription received in advance is classified in the Balance Sheet of a club as Current liability.

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