Accounting




July 2, 2008

What is the journal entry to record a one-year subscription for a magazine?

Let’s assume that the cost of the one-year subscription for a monthly magazine is $24. Let’s also assume the payment is made at the start of the subscription period, and thatĀ  your company prepares monthly financial statements.

One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $24 and to credit Cash for $24. At the end of each month you would make an adjusting entry to debit Subscriptions Expense for $2 and to credit Prepaid Subscriptions for $2. This approach would obviously match the annual cost to each of the 12 periods benefiting from the subscription. However, this is not practical given the small amount involved.

Thanks to the accounting concept of materiality, accountants can ignore the matching principle when the amount is insignificant in relationship to the company’s size. Since no investor or lender would be misled if the entire $24 appeared as an expense in one month and $0 appeared in the other 11 months, the following entry would be more practical: debit Subscriptions Expense forĀ $24 and credit Cash for $24 at the time of entering the invoice into the accounting records.

If the annual subscription was $8,400 for a trade journal and other membership services, a small company will likely find that amount to be significant and should not expense the entire amount in one month.

Learn more about Adjusting Entries.






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Comments

6 Responses to “What is the journal entry to record a one-year subscription for a magazine?”

  1. Mohd Nazir on July 7th, 2008 5:49 am

    what is deference between accounting and finance

  2. AHMED on July 10th, 2008 11:36 am

    WHAT THE KIND ACCOUNT OF CHEQUE RECIEVABL AND WHEN BECAM DEBIT AND CREDIT

  3. patty on July 20th, 2008 10:28 pm

    what kind of account of check is received when it becomes a debit or credit.

    Debit to subscription and credit to cash.

  4. pradeep on July 30th, 2008 12:59 am

    what will be entry taken when cash was brought from bank and theaf on the way

  5. kesavan on August 9th, 2008 11:06 pm

    what the club owes to its members?

  6. kesavan on August 9th, 2008 11:08 pm

    if the answer is accumulated fund, why?

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