Membership dues are regular payments made by members of an association. The dues represent the cost of being a member of the association, and are used to fund activities carried out by the organisation.
Membership dues are distinct from membership fees which tend to be one off payments.
The double entry bookkeeping for membership dues paid in advance is similar to other forms of income. For example, if a member pays an annual membership renewal of 1,200 in cash then the bookkeeping entry would as follows:
|Deferred membership income||1,200|
Accounting Equation for Membership Dues Journal Entry
The accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the total equity of the business This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.
In this case one asset (cash) increases representing money paid by the customer, this increase is balanced by the increase in liabilities (deferred membership income). The credit to the deferred membership income account represents a liability as the service still needs to be provided to the customer.
Membership Dues Revenue Recognition
In month one, one twelfth of the membership dues paid in advance would be recognized as income, and the following entry would be made:
|Deferred membership income||100|
|Membership income account||100|
Accounting Equation for Deferred Revenue Recognition Journal Entry
Again, the accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the total equity of the business This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.
In this case a liability (deferred membership income) decreases representing a reduction in the liability to the customer, this decrease is balanced by the increase in owners equity. The credit to the income statement for the membership income increases the net income, which increases the retained earnings, and therefore the owners equity in the business.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.