A club has paid subscription fees amounting to ₹1,400, of which ₹200 is prepaid for the upcoming period. How should this transaction be recorded?

Show Answers

Debit Profit & Loss Account by ₹1,400Debit Profit & Loss Account by ₹1,200Record ₹200 as a current assetBoth debit Profit & Loss Account by ₹1,200 and record ₹200 as a current assetNone of the above

Explanation

The total subscription fees paid is ₹1,400; however, ₹200 relates to the next accounting period and is considered prepaid. Therefore, only ₹1,200 should be charged to the Profit & Loss Account as expense for the current period. The prepaid amount of ₹200 is recognized as a current asset on the Balance Sheet since it benefits the future period.