ACCY 111 Maria Colls Tutorial #3

Tutorial Question:

On 31 March, Padbury Publishers received a subscription of $240 for the supply of twelve-
monthly magazines, beginning in April.
At the end of the reporting period, 30 June, the accountant suggested that the owner make
an adjusting entry to defer the revenue on nine issues until the new year.
The owner of the business was reluctant to do so, claiming that he had already received the
subscriptions in cash and could see no reason for the delay in recognising the revenue.
Do you agree with the owner or the accountant?
Write an answer in a paragraph to give to your tutor,
• giving your opinion;
• responding to the owner, and
• explaining the accountant’s position. (Ignore GST)

The accountant was correct in advising the owner to defer the remaining balance of $180.
Under accrual accounting, revenue is recognised when goods or services are provided.
Padbury Publishers had completed the first three issues to the value of $60, from April
through to June. Until each magazine has been delivered to the customer, there is still an
obligation to that customer. This should be recorded under liabilities in the Padbury
Publishers’ balance sheet so to provide the remaining nine magazines.

5/4/19 Student ID: 300503727 Page 1 of 1