Club and society accounts: practice questions

How to approach these questions

A club or society is not-for-profit, so there is no owner and no profit. Use the accumulated fund instead of capital, and a surplus or deficit instead of profit or loss. Read the requirement to see which statements are needed.

A typical question asks for a receipts and payments account, an income and expenditure account, and sometimes a subscriptions account or a statement of financial position. The receipts and payments account and the income and expenditure account look similar but do different jobs, so know which one is wanted.

The receipts and payments account is a summary of the cash book. It lists all money received and paid during the year, whatever period it relates to, and it includes capital items such as buying equipment.

The income and expenditure account is the club's equivalent of an income statement. It includes only revenue items, applies the accruals concept so income and costs belong to the correct year, and excludes capital receipts and payments. To keep them apart, remember that one is about cash and the other is about the year's true income and cost.

Subscriptions often decide the mark, so give them a small working every time. Subscriptions received in cash are not automatically the income for the year. Adjust for amounts owing and prepaid at the start and end of the year.

Build a subscriptions account. Debit subscriptions in arrears at the start and subscriptions prepaid at the end. Credit subscriptions in advance at the start and subscriptions owing at the end.

Put the cash received on the credit side. The balancing figure is the income for the income and expenditure account.

For example, RM9,000 cash is received, RM600 was owing at the year end and RM400 was prepaid, with nothing owing or prepaid at the start. Income is 9,000 + 600 − 400 = RM9,200.

Special activities and capital items follow their own logic. A bar, cafe or refreshment stall is usually shown as a small trading account. Only the resulting profit or loss goes into the income and expenditure account, not the gross takings.

Life membership fees are capital in nature. They are credited to a fund and released to income over several years.

The purchase of equipment or premises is a capital payment. It goes on the statement of financial position as a non-current asset, with depreciation charged to the income and expenditure account each year. A donation for a specific purpose is usually capital, and a general donation is often revenue, so read the description.

Check that each figure is treated by whether it is capital or revenue and which year it belongs to. You can find the accumulated fund at the start of the year by preparing a statement of assets less liabilities at that date. This is a favourite requirement, so practise it.

Then add the surplus, or subtract the deficit, to give the closing accumulated fund. It must agree with the equity side of the closing statement of financial position. If it does not, an item is in the wrong account.

Marks are mostly lost on these points. Treating the receipts and payments account as if it were the income and expenditure account is one. Putting capital items such as new equipment in the income and expenditure account is another.

Not adjusting subscriptions for accruals and prepayments is a third. Others are taking full bar takings into income instead of the bar profit, and forgetting depreciation on club assets. Another is mixing up arrears and advance, which pushes the balancing figure the wrong way.

If subscriptions and the accumulated fund leave you unsure where to start, one of our teachers can work through a full club question with you, step by step. Book a trial class