Exam layout
Income and expenditure account format
A club or society prepares an income and expenditure account instead of an income statement. It follows the accruals basis, and the result is a surplus or deficit.
The standard format
- Income: subscriptions (adjusted for arrears and advances)
- Income: other revenue (e.g. profit on events)
- Less: expenditure on running the club
- Less: depreciation of club assets
- Surplus or deficit for the year
Filled example
| Subscriptions | RM 4,100 |
| Profit on annual dinner | RM 600 |
| Total income | RM 4,700 |
| Rent | RM 1,800 |
| General expenses | RM 900 |
| Depreciation | RM 400 |
| Surplus for the year | RM 1,600 |
Notes
- It uses the accruals basis, unlike the receipts and payments account, which is pure cash.
- A surplus increases the accumulated fund; a deficit reduces it.
- Subscriptions are adjusted for amounts owing and prepaid before they are entered.
Building and reading this format
A club or society exists to serve its members, not to earn profit for owners. So instead of an income statement it prepares an income and expenditure account. It follows the accruals basis.
It records income earned and expenditure incurred in the year, whatever the date the cash moved. This is what separates it from the receipts and payments account, which is a pure cash record. Every figure must first be adjusted for amounts owing and prepaid.
Start with income. The main line is usually subscriptions, and it needs careful adjustment. Take subscriptions received.
Add amounts owing at the year end. Deduct amounts owing at the start. Add subscriptions received in advance last year that relate to this year.
Deduct those received in advance this year. For example, RM9,000 was received, RM600 is still owed and RM400 was received in advance.
Income is 9,000 + 600 − 400 = RM9,200. Then add the profit from any activity such as a refreshment bar (shown as one net figure), plus donations and interest received.
Next list the expenditure for the period: wages, rent, insurance, printing and depreciation of the club's assets. Depreciation involves no cash, but it is a real cost of using the assets.
Adjust each expense for amounts owing and prepaid. Any loss on a social event is also expenditure.
Compare total income with total expenditure. If income is higher, the result is a surplus.
If expenditure is higher, it is a deficit. The result is transferred to the accumulated fund, which is the club's version of capital.
A surplus, say RM1,100, means the club earned more than it spent and its fund grew. A deficit means members' funds fell.
The surplus measures performance for the year, not cash generated, so a club needs both this account and its cash summary. They can move in opposite directions in the same year.
Marks are mostly lost by treating this account as a cash record. Capital items, such as buying new equipment, are assets and belong in the statement of financial position, not in expenditure.
Entering raw subscriptions received, instead of the adjusted figure, ignores accruals. Leaving out depreciation is another frequent slip.
Wording matters too. The bottom line is a "surplus of income over expenditure" or a "deficit", never a "profit" or "loss", because a non-profit body does not trade for profit.
Show a bar or similar activity as one net line from a separate trading account. Give the account a title naming the organisation and the period.
If subscriptions adjustments leave you unsure which way to add and subtract, one of our teachers can build a few examples with you until the pattern is clear. Book a trial class
Related how-to
These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.
Practise the income and expenditure account
Share your own attempt in the trial class and the teacher will mark the layout line by line. One-to-one and online, from RM75/hr.
One-hour paid trial · Same-day reply