The N6000 subscription received is?

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.