Correct Option: A. Current Asset Explanation of the Correct Answer In financial accounting, the treatment of subscriptions (or membership fees) received by a club or organization depends on the timing of the payment relative to the financial year-end. In this case, we need to analyze the subscription payments made by the member for the years 1992 and 1993.

1. Understanding Subscription Payments:
2. The member paid N1,200 for the year 1992 and N1,000 for the year 1993.
3. The financial year of the society ends on December 31, 1993.
4. Timing of Revenue Recognition:
5. According to the accrual basis of accounting, revenue is recognized when it is earned, not necessarily when cash is received.
6. The N1,200 payment for 1992 is for a subscription that pertains to the previous financial year. By the end of 1993, this amount has already been earned and should be recognized as income for the year 1992.
7. Balance Sheet Treatment:
8. Since the N1,200 subscription for 1992 was received in cash but relates to a prior period, it does not represent a current liability (which would be an obligation to provide services in the future).
9. Instead, it is treated as a current asset because it reflects cash that has been received and is available for use by the club. It is essentially a receivable that has been settled.
10. Current Asset Definition:
11. Current assets are assets that are expected to be converted into cash or used up within one year. In this case, the cash received from the subscription is available for the club's operations.

Explanation of Why Other Options Are Incorrect

• B. Current Liability:
• A current liability represents an obligation that the club must settle in the near future, typically within one year. The N1,200 subscription does not represent an obligation; rather, it is cash received for services already rendered in the previous year. Therefore, it cannot be classified as a liability.
• C. Capital:
• Capital refers to the funds that are invested in the business by the owners or members. The N1,200 subscription is not an investment in the club; it is a payment for membership services. Thus, it does not qualify as capital.
• D. Profit:
• Profit is the excess of revenues over expenses for a given period. While the N1,200 subscription contributes to the club's revenue for 1992, it is not classified as profit on the balance sheet. Instead, it is recognized in the income statement for the year it was earned (1992) and does not appear as a line item on the balance sheet.

Summary of Key Points

• The N1,200 subscription for 1992 is treated as a current asset because it represents cash received for services rendered in the past.
• Current assets are resources expected to be converted into cash or used within one year.
• Current liabilities represent obligations, which the N1,200 subscription does not fulfill.
• Profit is recognized in the income statement, not on the balance sheet.

This understanding is crucial for accurately preparing financial statements and ensuring that all transactions are recorded in accordance with accounting principles.