Reference no: EM131536628

Question: Entrance Fees: This source of income provides an accounting problem. Strictly, the income relates to the whole period the new member will belong to the society. But no one knows how long this will be. The alternative accounting procedures are:

(a) To credit all entrance fees to the Income & Expenditure Account. Provided they are small in total compared with other income, this is acceptable. It is still inaccurate but the inaccuracy is of little import.

(b) To credit all amounts received to a special Entrance Fees Account, transferring a proportion (say one-tenth) to succeeding Income and Expenditure Accounts.

(c) To credit entrance fees directly to the Accumulated Fund. This avoids the distortion involved in (a) and the complexities involved in (b).