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subscription in advance is classified in the balance sheet as

Accounts - Principles of Accounts
WAEC 2014

subscription in advance is classified in the balance sheet as

  • A. an asset
  • B. a liability
  • C. a deficit
  • D. a surplus
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Correct Answer: Option B
Explanation

When a company receives money in advance of earning it, the accounting entry is a debit to the asset Cash for the amount received and a credit to the liability account such as Customer Advances or Unearned Revenues. The subscription in advance is a liability because it is a future earning that will be due in future, it means the company is owing outsiders the said amount tied to the payment.


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