Subscription of ₹ 6,24,000 had been shown in Income & Expenditure account prepared for the year ending 31st March, 2021. Additional information is given below :
Subscription outstanding
On 31st March, 2020 (₹) 55,000, On 31st March, 2021 (₹) 69,000. Subscription recd. in advance On 31st March, 2020 (₹) 31,000, On 31st March, 2021 (₹) 35,000.
The amount of subscription received during the year 2020-21 would be :

Question

Subscription of ₹ 6,24,000 had been shown in Income & Expenditure account prepared for the year ending 31st March, 2021. Additional information is given below : 
Subscription outstanding 
On 31st March, 2020 (₹) 55,000, On 31st March, 2021 (₹) 69,000. Subscription recd. in advance On 31st March, 2020 (₹) 31,000, On 31st March, 2021 (₹) 35,000. 
The amount of subscription received during the year 2020-21 would be :

Accepted Answer

The correct option is 3: ₹ 6,14,000

The question requires us to reverse the adjustments made under the accrual basis of accounting to find the actual cash amount of subscription received during the financial year 2020-21. The figure of ₹ 6,24,000 shown in the Income & Expenditure Account represents the income earned for the year, irrespective of whether the cash was received. To convert this back to the cash received amount, we use a systematic adjustment process. We must add the cash received this year that relates to other periods, and subtract the income earned this year for which cash was received in other periods. The calculation is: Start with Subscription for the Year (₹ 6,24,000). Add: Outstanding Subscription (Beginning, 31st Mar 2020) of ₹ 55,000 (received this year). Add: Advance Subscription (End, 31st Mar 2021) of ₹ 35,000 (received this year, but for the next year). Subtract: Outstanding Subscription (End, 31st Mar 2021) of ₹ 69,000 (income for this year, but not received). Subtract: Advance Subscription (Beginning, 31st Mar 2020) of ₹ 31,000 (received last year, but is income for this year). Therefore, the amount is ₹ 6,24,000 + ₹ 55,000 + ₹ 35,000 - ₹ 69,000 - ₹ 31,000 = **₹ 6,14,000**.

The incorrect option is 1: ₹ 6,34,000
This option results from a critical error where the signs of the adjustments are incorrectly applied or systematically reversed. A common mistake is to reverse the signs for all four items: adding the outstanding at the end and advance at the beginning, and subtracting the outstanding at the beginning and advance at the end. For instance, calculating ₹ 6,24,000 + ₹ 69,000 - ₹ 55,000 - ₹ 35,000 + ₹ 31,000 results in ₹ 6,34,000. This demonstrates a conceptual misunderstanding of converting accrual-based figures back to a cash basis for the Receipts and Payments Account. The outstanding subscription at the end must be subtracted, and the advance subscription at the end must be added, as they signify cash flow differences.

The incorrect option is 2: ₹ 6,04,000
This result is likely reached by making an error in calculating the net change in outstanding and advance amounts and applying them incorrectly. The net increase in Outstanding Subscription is ₹ 14,000 (69,000 - 55,000), and the net increase in Advance Subscription is ₹ 4,000 (35,000 - 31,000). To find the cash received, you should subtract the net increase in outstanding (cash not received) and add the net decrease in advance (cash received earlier). Here, there is a net increase in both. If one incorrectly calculates ₹ 6,24,000 minus both the net increase in outstanding (₹ 14,000) and the net increase in advance (₹ 4,000), the result is ₹ 6,06,000, which is very close to this option. This suggests an error in applying the net change logic to the advance subscription.

The incorrect option is 4: ₹ 6,16,000
This figure is also close to the correct answer, suggesting a minor calculation or sign error on one of the figures. For example, if the difference between the Advance Subscription figures (₹ 35,000 - ₹ 31,000 = ₹ 4,000) was incorrectly calculated or applied. The correct net effect of all four adjustments is a deduction of ₹ 10,000 (₹ 55,000 + ₹ 35,000 - ₹ 69,000 - ₹ 31,000 = -₹ 10,000). A sign error on a single figure, such as incorrectly adding the Advance Subscription (Beginning) instead of subtracting it from the net change, could lead to this value or a figure very close to it.