subscription received during the year N30,000. Subscription owed last year N4,000. subscription received for next year N6,000.
A. capital
B. fixed asset
C. current liability
D. current asset
Correct Answer:
Option C – current liability
Explanation
A subscription is a relatively new business model by which a customer agrees to pay the company for products or services throughout a specified time period. For example, the customer may agree to purchase a one-year subscription to a magazine which he receives on a regular basis (monthly, weekly, etc.).
Current liabilities are a company’s debts or obligations that are due within one year or within a normal operating cycle. While current asset refers to cash and other assets that are expected to be converted to cash within a year. In this case, the company is owing to a subscriber for a good or service that has already been paid for (by the subscriber), but not yet delivered by the company. on the part of the company’s, it will be considered a liability due within a year and on the subscriber’s part, an asset due within a year.
