Club and society accounts: worked examples

Method and where the marks are

Club accounts differ from ordinary business accounts because a club does not exist to make a profit. Fix the vocabulary first, because the wrong word costs presentation marks even when the figures are right.

A club prepares four statements. They are a receipts and payments account (a summary of the cash book) and a subscriptions account. The others are an income and expenditure account (the club's version of an income statement) and a statement of financial position. The result is a surplus or deficit, not a profit or loss.

The accumulated fund replaces capital. Never write "net profit" or "capital" on a club answer.

Start by sorting each item into capital or revenue, and into the correct period. The receipts and payments account is purely cash. It happily mixes buying new equipment (capital) with paying rent (revenue), and it ignores amounts owing.

To build the income and expenditure account, strip out the capital items and keep only the revenue items. Then adjust each revenue item to the amount that belongs to this year. If the club paid RM4,800 rent but RM400 was for next year, only RM4,400 goes to the income and expenditure account.

Show the adjustment, not just the answer. That is where the method marks are.

Subscriptions are the most tested and most error-prone area, so give them their own working. Open a subscriptions account and treat it like a trade receivables account. Opening balances come first.

Subscriptions owing by members at the start (arrears) go on the debit side. Subscriptions paid in advance at the start go on the credit side. Enter the cash received during the year on the credit side.

Carry down the closing balances the other way round. Closing arrears go on the credit side, and closing advances go on the debit side.

The balancing figure is the subscriptions income for the year, which you transfer to the income and expenditure account. Copying the cash figure from the receipts and payments account only equals income by accident.

If the club runs a shop, cafe or bar, prepare a small separate trading section. Only the resulting profit (as income) or loss (as expenditure) enters the income and expenditure account. Do not scatter the takings and purchases across the main statement.

Use the cost of sales logic you already know. Opening inventory plus purchases minus closing inventory gives cost of sales, and takings minus cost of sales gives the profit on refreshments.

The accumulated fund is the club's opening capital, and you often have to calculate it first. Build an opening statement of affairs. List what the club owned at the start (equipment, inventory, bank, subscriptions owing to it).

Subtract what it owed (subscriptions in advance, creditors, a bank overdraft). The difference is the opening accumulated fund.

Show this working, because it earns marks on its own and feeds the closing statement of financial position. At the year end, closing accumulated fund equals opening fund plus the surplus, or minus the deficit.

Watch for these recurring errors. Life membership and donations for a specific building fund are usually capital receipts, not ordinary income, so read the question for how to treat them. Depreciation of equipment must appear in the income and expenditure account even though no cash moved.

Loan interest owing at the year end must be accrued. Label the final result as a "surplus of income over expenditure" or a "deficit".

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