On 1 November 2018 the publishers of 'Home' magazine received $198 (including GST) in advance for a 12-month subscription to their monthly issue. At the end of the financial year on 30 June 2019 the adjusting entry will be:

Question

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The correct adjusting entry is to recognize the revenue earned up to the end of the financial year. From 1 November 2018 to 30 June 2019 is 8 months, so 8 out of the 12 months of the subscription have been provided. The total subscription cost is $198, including GST. Assuming GST is 10%, the subscription cost excluding GST is $180 ($198 / 1.1). For 8 months, this is $120 ($180 * 8/12). The entry debits (decreases) the liability account (Unearned subscriptions) and credits (increases) the revenue account (Subscriptions income) for the portion of the subscription that has been earned by the end of the financial year.

On 1 November 2018 the Publishers of 'Home' Magazine Received