Clubs and Societies Accounts

Non-profit organizations

Non profit is a type of organization that does not earn profits for its owners. Typically non profit
organizations are charities or other types of public service organizations.

Important terminologies used in accounts

Trading Business Non-trading Business
Capital (assets – liabilities) Accumulated fund (asset – liabilities)
Cash Book Receipts and Payments
Trading Account Bar Trading/Activity Trading
Income Statement Income & Expenditure Account
Statement of Financial Posittion Statement of Financial Position
Profit for the year Surplus (excess of income over expenditure)
Loss Deficit (excess of expenditure over income)
Trade Receivables Subscription in arrears
Trade payables Subscription in advance

Important Terms and Accounting Treatment

1. Donation

Donations are the life blood of non-profits that help them survive and fulfil their missions. Donation is
received by two ways.

(a) Specific donation: An amount donated by members or any other person for any specific purpose.
It is a capital receipt and shown in the Balance Sheet.
Examples of such donations are: donation for library, donation for building, etc.

(b) General donation: An amount donated by members or any other person without any specific
purpose is called general donation. Its amount is comparatively small than the specific donation. It is
a revenue receipt and shown in Income and Expenditure Account.

2. Legacy

It is the amount received by the concern as per the 'will' of the 'donor'. It appears on the receipts side of receipts
and payments account. It should not be considered as income but should be treated as capital receipt i.e.
credited to capital fund account.

3. Entrance fees

This is also an item to be found on the receipts side of receipts and payments account. There are arguments that
it should be treated as capital receipt because entrance fees is to be paid by every member only once (i.e.
when enrolled as member, hence it is nonrecurring in nature. But another
 argument is that since members to be enrolled every year and receipt of entrance fees is a regular item,
therefore, it should -be credited to income. In the absence of the instructions anyone of the above treatment
may be followed but students should append a note justifying their treatment.

4. Subscription

It is the amount paid by the members’ usually annual basis for the facilities provided by the club or society.
It is a revenue receipt.
Receipt and Payment account records the actual subscription received. It may pertain to any year. However, In
order to post it to the Income and Expenditure Account adjustments have to be made to the subscription as
only subscription pertaining to that particular year is recorded in I/E account.

Calculate subscription

$
Total subscription received during the year XX
Add opening subscription in advance XX
Add closing subscription in arrears XX
Less closing subscription in advance (XX)
Less opening subscription in arrears (XX)
Current year subscription XX

Ledger Account to calculate subscription

Subscription Account
2018 $ 2018 $
Jan 1 Balance b/d (Arrears) XX Jan 1 Balance b/d (Prepaid) XX
Inc & Exp. Account XX Bank (R/P Account) XX
Dec 31 Balance c/d (Prepaid) XX Irrecoverable debts XX
Dec 31 Balance c/d (Arrears) XX
XX XX
2019 Jan 1 Balance b/d (Arrears) XX 2019 Jan 1 Balance b/d (Prepaid) XX

Practice Questions

1. The following information relates to the annual membership subscriptions of a cricket club for
the year ended 31 December.
Cash received during the year for
subscriptions totalled $81 000.
Which amount should be shown in the income
and expenditure account for membership
subscriptions?
 2. During the year ended 31 December 2001, the
XY Sports Club received $10 860 for subscriptions.
The following further information is available.
What is the figure for subscriptions in the Income and
Expenditure Account for the year ended 31 December
2001?

3. The information relates to the subscriptions of a

club.
Cash received during the year was $3750. What
was the subscription income for the year?

4. A club provides the following information relating

to members’ subscriptions.
What amount for subscriptions will be entered in the Income
and Expenditure Account for the year ended 31 December
2004?

Life membership subscription

Generally, the members are required to make the payment in a lump sum only once which enables them to
become the members for whole of the life. Life members are not required to pay the annual membership fees.
As 'life membership fees' is a substitute for 'annual membership fees', therefore, it is desirable that life
membership fees should be credited to a separate fund and fair proportion be credited to income in subsequent
years. In the examination question, if there is no instruction as to what proportion be treated as income then
whole of it should be treated as capital.

Practice Questions

1. A club received the following life membership fees in each of its first 2 years

Year 1 $1500
Year 2 $800

A club’s policy is to take credit for life membership fees in equal amounts over 10 years.

Calculate the amount transferred to Income and Expenditure account and Balance Sheet for
each of the 2 years

2. A club received the following life membership fees in each of its first 2

years Year 1 $1000

Year 2 $900
 A club’s policy is to take credit for life membership fees in equal amounts over 5 years.

Calculate the amount transferred to Income and Expenditure account and Balance Sheet for
each of the 2 years

3. A club received the following life membership fees in each of its first 3 years

Year 1 $5000
Year 2 $2000
Years 3 6000

A club’s policy is to take credit for life membership fees in equal amounts over 10 years.

Calculate the amount transferred to Income and Expenditure account and Balance Sheet for
each of the 3 years

6. Sale of old assets

It is a non-recurring item. It cannot be taken to income and expenditure account. It leads to reduction in asset.
Therefore, it is shown by way of deduction from the concerned asset. It is important to note that it is the "book
value" that is to be deducted from asset. Profit or loss in such a case is taken to income and expenditure
account. Where the book value of asset is nil, the entire proceeds of sale be treated as income.

7. Honorarium

Persons may be invited to deliver lectures or artists may be invited to give their performance by a club (for its
members). Any money, paid to invitees, is termed as honorarium and not salary. Such honorarium represents
expenditure and will be debited to income and expenditure account.

8. Bar profit/Refreshment profit/shop profit

Bar Trading Account

$ $
Bar sales XX
Cost of sales
Bar opening inventory XX
Purchases XX
Bar Closing inventory (XX)
(XX)
Gross profit XX
Bar related expenses (XX)
Bar profit XX

In some questions, bar purchases inventory on credit so suppliers opening and closing balances will be
provided in question then purchases will be calculated as:
Credit Purchases = payment to suppliers + closing payables – opening payables
 Practice questions

1. The Cardio Health Club operates a fitness centre and a shop and provides the following information.

1 June 2017 31 May 2018

Shop inventory $8500 $4800
Shop wages accrued $1000 $3000

The receipts and payments in the bank current account for the year ended 31 May 2018 shows:

Shop revenue $120000

Shop purchases for resale $32500
Wages of shop staff $27000
Insurance $12000
Heating and lighting $20000

1. Insurance and heating and lighting are apportioned 80:20 between the fitness club and the shop.

Prepare the shop income statement for the year ended 31 May 2018.

2. A club provides the following information related to its Bar trading activity.

Bar sales $60000

Payment to suppliers of bar $20000
Bar equipment depreciation $3500
Barman wages $6000

1 June 2017 31 May 2018

Bar inventory $5000 $4000
Bar Payables $2000 $2500

Calculate profit or loss in bar trading

Receipts and Payment Account

 The receipts and payments account is used as a summary of all of the cash transactions for a
period of time, in a similar manner to a cash book.
 It shows opening / closing bank balance
 It aids preparation of financial statements
 Receipt and Payments Account
for the year ended 31 December 2016
Dr. Cr.
Receipts $ Payments $
Balance b/d (Opening bal.) XX All cash payments XX
All Cash receipts XX Balance c/d (closing Bal.) XX
XX XX

Income and Expenditure Account

 Calculate subscriptions earned.

 Calculate entrance fees and/ or life membership subscriptions for the year.
 Calculate net income from other ancillary activities (dinner/ dance/ competitions).
 Calculate expenses incurred by preparing ledger accounts for expenses (where opening
and closing balances are available).
 Calculate depreciation.

Income and expenditures Account for the year ended 31st December
2019
Incomes: $ $
Subscription (current year only) XX
Bar/shop profit XX
XX
Profit on disposal XX
Income from any social events XX
Any other income XX

Expenditures: XX
Loss on disposal XX
Bar/restaurant loss XX
Wages and salaries XX
Club Rent XX
Club Insurance XX (XX)
Depreciation XX XX
Other revenue expenditures
Surplus/(deficit)

Difference between R/P account and I/E account

Receipts and Payments Account Income and Expenditures Account
It is like a cash book It is like an Income Statement.
Closing balance is carried forward to the next Closing balance is merged into accumulated fund.
period.
Closing balance represents cash in hand and at Closing balance represents either surplus or
bank. deficiency.
It includes both capital and revenue items It includes only revenue items.
It ignores outstanding items. It records outstanding items.
It ignores credit sales and purchases. It records credit sales and purchases.
 It includes prepaid items. It excludes prepaid items.
It begins with a balance. It does not begin with a balance.
It includes items relating to past, present or It includes items relating to current period only.
future periods.
It ignores non-cash items like depreciation, bad It records non-cash items like depreciation, bad
debts etc. debts etc.

Accumulated Fund

Accumulated fund is also a difference of Assets and Liabilities.

It arises from accumulated surpluses in previous years
Accumulated Fund = Assets – Liabilities

ACCUMULATED FUND
Balance at start XX
± Surplus/(Deficit) of income over expenditure XX
Balance at end of the year XX

Calculation of Accumulated fund

1. The treasurer has provided the following information relating to a golf club’s financial position
at the year end.
$
Cash at bank 2 50
Non-current assets 120
Prepaid expenses 80
Inventory of refreshments 500
Subscriptions in advance 50
Subscriptions in arrears 100
Unpaid bills 200

What is the accumulated fund at the year end?

2. A sports club had the following assets

and liabilities.
How much was the accumulated fund?
 Statement of Financial Position as at 31st …., 20X
$ $
Non-Current Assets
Land and building XX
Machinery XX
Motor vehicles XX
Fixtures and Fittings XX
XX
Current Assets

Refreshment Inventory XX
Subscription in arrears XX
Other receivables XX
Bank (R/P) XX
XX
Total Assets XX

Accumulated Fund XX
Opening balance
Surplus/ (deficit) XX
XX
Life membership fee XX
Donation (if capital receipts) XX

Non-Current Liabilities
Long term bank loan XX

Current Liabilities
Subscription in advance XX
Trade payables XX
Other payables XX
XX
XX
Non trading

ON/22/31
AZ Tennis Club has a financial year end of 31 December.

For some years it has charged an annual subscription of $50. New members joining before 31 May paid the
full year’s subscription, but members joining on or after 1 June paid only $30.

The club also offered life membership for $750, which was released to income over 10 years. Further

information is as follows:

1 On 1 January 2021 the club had 210 members on annual subscription. Of these, eight had already paid their
2021 subscription and seven had not yet paid their 2020 subscriptions of $50.

Of those in arrears on 1 January 2021, six members paid their 2020 subscription during January
2021. The seventh resigned his membership and his debt was written off.

2 On 1 January 2021 the club also had three life members, all of whom had taken out life membership during
2020.

3 Eight new members joined the club in the period 1 January to 31 May 2021. Eleven new members joined
in the period 1 June to 31 December 2021.

4 During the year five existing members decided to become life members. These did not have to pay the
annual subscription for 2021.

5 It was decided that the annual subscription for 2022 would be increased to $55.

6 On 31 December 2021 there were 14 members who had already paid their 2022 subscription and four who
had not yet paid their 2021 subscriptions of $50.

Answer the following questions in the question paper. Questions are printed here for reference
only.

(a) Calculate the total receipts from members recorded in the receipts and payments account for the year
ended 31 December 2021.
[8]

(b) Prepare the subscriptions account for the year ended 31 December 2021. [6]

(c) Calculate:

(i) the life membership fees for inclusion in the income and expenditure account for the year ended
31 December 2021
[1]

(ii) the value of the life membership fund for inclusion in the statement of financial position on 31
December 2021.
[3]

(d) Suggest two sources of income, other than subscriptions, which might be received by a club.
[2]
 3

At present club members have to be aged 16 or over. It had been suggested that a junior section of the club
should be opened for younger members, with an annual subscription of $15.

(e) Advise the managing committee whether or not they should open a junior section of the club. Justify
your answer.
[5]

ON/22/33
GHY is a club which provides social facilities for members and also sells refreshments to them. The cash book
is the only book-keeping record which is maintained.

The treasurer prepared the following accurate receipts and payments account.

GHY
Receipts and payments account for the year ended 31 December 2021

$ $
Balance b/d 420 Suppliers of refreshments 810
Subscriptions 9 200 Rent 6 000
Sales of refreshments 1 180 Purchases of fixtures 2 600
Balance c/d 50 Other operating costs 1 440
10 850 10 850

The treasurer then prepared the following calculations and the financial statements. These contained
errors and omissions although the component amounts used were correct.

1 Subscriptions for the year

$
Receipts 9200
Arrears at start of the year 300
In advance at end of the year 250
In advance at start of the year (400)
Arrears at end of the year (200)
Subscriptions for the year 9150

The treasurer did not take into account that $150 of the arrears at the start of the year had been written off.

2 Benefit from selling refreshments

$
Payments to suppliers 810
Amounts owing to suppliers at start of the year 60
Amounts owing to suppliers at end of the year 95
965
Sales 1180
Benefit 215

3 Increase in inventory of refreshments

$
Inventory at end of the year 170
Inventory at start of the year (80)
Increase 90

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4 Depreciation charge for the year

$
Fixtures at valuation at end of the year 9100
Fixtures at valuation at start of the year (7600)
Fixtures purchased 2600
Depreciation 4100

5 Income and expenditure account for the year ended 31 December 2021

$ $
Subscriptions 9 150
Benefit from sales of refreshments 215
Increase in inventory 90
9 455
Rent 6 000
Other operating costs 1 440
Depreciation 4 100 11 540
Deficit (2 085)

6 Statement of financial position at 31 December 2021

$ $
Non-current assets
Fixtures at valuation 9 100
Current assets
Inventory 170
Subscriptions in advance 250
Bank 50 470
Total assets 9 570

Accumulated fund at 1 January 2021 7 940

Deficit for the year (2 085)
Accumulated fund at 31 December 2021 5 855
Current liabilities
Owing to suppliers 95
Subscriptions in arrears 200 295
Total liabilities 6 150

Answer the following questions in the question paper. Questions are printed here for reference
only.

(a) Prepare the correct:

(i) income and expenditure account [12]

(ii) statement of financial position, clearly disclosing the surplus or deficit for the year. [7]

(b) Advise the managing committee whether or not they should introduce a policy of cancelling the
membership of members whose subscriptions are overdue by more than one month. Justify your
answer.
[3]

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Additional information

Some clubs offer life membership.

(c) Outline the method of accounting for life membership subscriptions and state the accounting concept
which is being applied.
[3]

MJ/22/32
MN Drama Club was formed in 2017 with the objective of promoting modern performances. The treasurer of
the club resigned on 31 December 2021. The chairman prepared a draft income and expenditure account which
was based on the receipts and payments account.

Draft Income and Expenditure account for the year ended 31 December 2021

$ $
Subscriptions 40 400
Tuition fees 8 000
Ticket income from performances 14 200
Donation 7 500
70 100
Expenses for performances 11 500
Office equipment (first payment) 2 000
Administrative expenses 30 100
Heating and lighting 13 200
Building extension 16 000
Building maintenance 4 600
77 400
Deficit for the year (7 300)

The draft income and expenditure account had been presented to a member of the club who is an accountant.

Further information was available.

1 There is a great demand for after-school tutorial classes in the local community. In October 2021 the club
started running after-school tutorial classes. The club targeted the classes at children from poor families. A
maximum of 20 children could join these classes. Children were required to join as student members of the
club and pay the following fees in advance:

i student membership fee of $100, which is one-third of an ordinary member’s subscription ii

a tuition fee of $400 covering the period from 1 October 2021 to 31 May 2022.

Student membership fees paid by children are included in subscriptions in the draft income and
expenditure account.

The tuition fee is refundable on a monthly basis if the student withdraws. The student membership fee is
non-refundable.

The tutors are volunteers and have experience in teaching. The

classes were popular and were fully booked.

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2 Information relating to ordinary members’ subscriptions at 31 December 2021 and at 31 December

2020 is as follows:

31 December 31 December
2021 2020
Number of members paid in advance 0 9
Number of members in arrears 24 4

3 Information relating to non-current assets:

Building Equipment
$ $
Cost at 31 December 2020 200 000 120 000
Accumulated depreciation at 31 December 2020 110 000 85 000
Depreciation method Straight-line Reducing balance
Annual rate 10% 20%

A full year’s depreciation is charged in the year of purchase of the asset.

An item of office equipment was purchased on credit during the year. The debt was repayable in three
equal instalments at intervals of four months, with the first payment made in October 2021.

4 During the year a member donated $7500 which is to be used to sponsor the club’s participation in a
national event for the coming five years.

5 Other prepaid and accrued expenses at 31 December 2021 and at 31 December 2020 are as follows:

31 December 31 December
2021 2020
$ $
Accrued
Administrative expenses 9000 6200
Heating and lighting – 1500

Prepaid
Heating and lighting 700 –

6 Cash at bank at 31 December 2021 amounted to $6400.

Answer the following questions in the question paper. Questions are printed here for reference
only.

(a) State two reasons why a club needs to have a clear objective. [2]

(b) Explain how the tuition fees of $8000 should be treated in the revised financial statements of MN
Drama Club. Support your answer with reference to the relevant accounting concept. [4]

(c) Prepare the revised income and expenditure account for the year ended 31 December 2021.
[12]

Additional information

The chairman has received many requests from local parents for the tutorial classes because the fee
charged by the club is 50% lower than other organisations. He has a plan to admit 60 students in October
2022. To increase the capacity, he estimates that an expenditure of $30 000 would be incurred in an
extension of the club’s building.

(d) Advise the chairman whether or not he should carry out the plan. Justify your answer. [7]

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MJ/22/31
MC Sports Club provides sport facilities, operates a café for its members and hires out its meeting room.

The treasurer of the club provided some of the financial details for the year ended 31 December 2021 as follows:

1 Balance at 1 January 2021

$
Equipment (net book value) 78 000
Inventory of café 9 500
Amount owed to café suppliers 11 400
Deposit paid to a hotel for annual dinner 4 000
Receipt for the hire of club’s meeting room in May 2021 2 100

2 Annual subscription of each member is $200. New members admitted in the first half of the year have to pay
the annual subscription in full. New members admitted in the second half of the year have to pay 50% of
the annual subscription. Details of the number of members for the year ended 31 December 2021 were as
follows:

Members at 1 New members admitted New members admitted

January 2021 before 1 July 2021 after 1 July 2021
420 18 24

The number of members whose subscriptions were in advance or in arrears were as follows:

At 1 January 2021 At 31 December 2021

In advance 8 11
In arrears 15 20

All these subscriptions refer to full subscriptions.

3 All café sales are for cash, at a mark-up of 80%.

4 Payments to suppliers of the café for the year were $42 000.
The amount owed to the suppliers at 31 December 2021 was $13 600. The
inventory of the café on that date was valued at $10 200.

5 Other receipts and payments for the year were as follows:

$
Purchase of new equipment 14 000
Club expenses 94 400
Café wages 22 000
Final payment to hotel for annual dinner 16 200
Receipts for the hire of the meeting room 4 600

6 Club equipment is to be depreciated at an annual rate of 15% using the reducing balance method. A full year’s
depreciation is charged in the year of purchase.

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Answer the following questions in the question paper. Questions are printed here for
reference only.

(a) State three differences between the financial statements of a not-for-profit organisation and those of
a limited company.
[3]

(b) Prepare the café trading account for the year ended 31 December 2021 to find the profit or loss on
its trading activity.
[4]

(c) Prepare the subscriptions account for the year ended 31 December 2021. [4]

(d) Prepare the income and expenditure account for the year ended 31 December 2021. [6]

Additional information

The club will admit life members from 1 January 2023. A life membership fee of $1 500 will be payable
on the date of admission.

(e) Explain to the treasurer how the club should account for the life membership fees in the club’s
financial statements.
[3]

Additional information

The committee of the club is thinking of closing the café. Vending machines would be installed to provide
snacks and drinks for the members.

(f) Advise the committee whether or not the café should be closed. Justify your answer. [5]

ON/21/32
The AB Club has 200 members who pay an annual subscription of $100 each. It provides social facilities to its
members and also rents and operates two vending machines to sell soft drinks to members. The statement of
financial position at 30 June 2020 showed the following assets and liabilities.

$
Equipment at valuation 2100
Furniture at valuation 1050
Subscriptions in arrears 400
Bank balance 1420
Cash 180
Inventory of soft drinks 210
Owing to suppliers of soft drinks 290

The following information was available.

1 Equipment and furniture were valued on 30 June 2021 at $1700 and $1500 respectively.

2 All subscriptions are received by cheque and banked immediately. On 30 June 2021, there were no arrears
of subscriptions and three members had paid in advance for the coming year.

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3 All takings from the vending machines are in cash. Some are used to pay club expenses and some are
paid into the bank. Soft drinks are sold at a mark-up of 100%.

4 The inventory of soft drinks on 30 June 2021 was valued at $490 at selling price. On that date, the amount
owing to suppliers of soft drinks was $305.

5 Cash in hand on 30 June 2021 amounted to $150. The balance on the bank account on that date was $2290.

6 Payments made through the bank during the year ended 30 June 2021 were:

$
Purchase of new furniture 720
Rent of premises 12 000
Rent of vending machines 6 000
Club expenses 5 140
Payments to suppliers of soft drinks 12 600
Total bank payments 36 460

Answer the following questions in the question paper. Questions are printed here for
reference only.

(a) Calculate the profit from the vending machines for the year ended 30 June 2021. [5]

(b) Calculate for the year ended 30 June 2021:

(i) the value of subscriptions received and banked [3]

(ii) cash takings banked [4]

(iii) club expenses paid by cash. [4]

(c) Prepare the income and expenditure account for the year ended 30 June 2021. [6]

Additional information

It has been suggested to the managing committee that the club starts to rent a third vending machine
selling soft drinks.

(d) Advise the committee whether or not to start renting a third vending machine. Justify your answer.
[3]

ON/21/31
X Soc is a charitable not for profit organisation. It is run by a group of volunteers and its aim is to provide
specialist wheelchairs for disabled athletes. It runs a charity shop in the city centre where people donate
unwanted items which are then sold to earn a profit for the organisation. It also receives cash donations from
the public and grants from the national government.

X Soc was formed on 1 January 2020. At the end of the first year of operation the following accounts were
prepared.

X Soc
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Charity shop trading account for the year ended 31 December 2020

$ $
Revenue 126 000
Shop rent 18 000
Shop operating costs 17 400
35 400
Profit for the year 90 600

Receipts and payments account for the year ended 31 December 2020

$ $
Grants 80 000 Administrative expenses 14 220
Cash donations 96 520 Advertising and fundraising 27 240
Cash sales 126 000 Purchase of computer 7 000
Payments to wheelchair suppliers 212 660
Shop rent 19 000
Shop operating costs 14 680
Balance c/d 7 720
302 520 302 520

Answer the following questions in the question paper. Questions are printed here for
reference only.

(a) Explain how the trading account of a charity shop is different from that of a business. [4]

Additional information

1 Advertising costs included $7200 for a series of advertisements running from November 2020 to
April 2021.

2 On 31 December 2020 deposits paid for wheelchairs ordered but not yet manufactured
amounted to $39 400.

3 Accruals at the year end included $450 for administrative expenses.

4 It was decided that the cost of the computer should be written off in equal instalments over five
years.

(b) Prepare the income and expenditure account for the year ended 31 December 2020. [7]

(c) Prepare the statement of financial position at 31 December 2020. [8]

(d) Suggest two ways in which X Soc could increase its income. [2]

(e) Explain why the accumulated fund of a not for profit organisation may not be equal to the
balance on its bank account.
[2]

(f) Explain why the financial statements of some not for profit organisations may contain entries for
subscriptions.
[2]

Mar/21

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Sunshine Social Club is a sports club and has a year-end of 31 December. The club started admitting life
members in 2015. It is the policy of the club that a life membership fee is initially credited to a life membership
fund and recognised in the income and expenditure account over five years equally. Life membership fees
received in the previous five years were as follows:

$
2019 6 500
2018 4 000
2017 4 500
2016 2 000
2015 1 000

Answer the following questions in the question paper. Questions are printed here for
reference only.

(a) Calculate the life membership fund shown in the statement of financial position at
31 December 2019. [3]

Additional information

The treasurer of the club has prepared the receipts and payments account for the year ended 31
December 2020 as follows:

Receipts and payments account

$ $
Balance b/d 3 200 Purchase of club equipment 24 000
Membership subscriptions 73 000 Clubhouse expenses 37 000
Special donation 10 000 Administrative expenses 46 000
Life membership fees 8 000
Sale of club equipment 2 200
Balance c/d 10 600
107 000 107 000

The special donation of $10 000, received during 2020, is designated for the club’s anniversary activities in
2022. The treasurer is unsure whether this amount should be treated as income for the year ended 31
December 2020.

(b) State three differences between a receipts and payments account and an income and
expenditure account.
[3]

(c) Explain to the treasurer, with reference to the appropriate accounting concepts, the accounting
treatment of the special donation of $10 000 in the financial statements of the club.
[5]

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Additional information

1 During the year ended 31 December 2020, an item of fully depreciated club equipment, which had an
original cost of $8000, was sold for $2200.

2 It is the club’s policy to depreciate club equipment at an annual rate of 20% using the reducing
balance method. A full year’s depreciation is charged in the year of acquisition.

3 Selected balances at 31 December 2020 and at 31 December 2019 were extracted as follows:

2020 2019
$ $
Club equipment – cost ? 88 000
Club equipment – accumulated depreciation ? 52 000
Membership subscriptions in advance 1 100 2 700
Membership subscriptions in arrears 1 800 3 800
Administrative expenses paid in advance 0 4 200
Clubhouse expenses accrued 0 2 660
Administrative expenses accrued 650 0

(d) Prepare the income and expenditure account for the year ended 31 December 2020. [8]

Additional information

The chairman of the club decided to transfer $6000 from the accumulated fund to a fund designated for the
anniversary activities on 31 December 2020.

(e) (i) Calculate the accumulated fund at 31 December 2019. [3]

(ii) Prepare a statement showing the movement on the accumulated fund for the year ended 31
December 2020.

[3]
MJ/21/34
ZV Sports Club provides sports facilities and also sells refreshments to members. It has a membership list with
details of 200 members. The annual subscription is $100. The club has a financial year end of 31 December.

Before preparing the financial statements for the year ended 31 December 2020 the subscriptions account
appeared as follows.

Subscriptions account
$ $
Balance b/d 2 100 Balance b/d 300
Bank 19 700

At 31 December 2020 there were 5 members who had paid in advance for 2021. Details of members whose
subscriptions were in arrears at that date were as follows.

2 members had not paid for 2020 only.

6 members had not paid for 2019 and 2020.

3 members had not paid for 2017, 2018, 2019 and 2020.
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During the year ended 31 December 2020 the managing committee of the club had decided that in future it
would only carry forward unpaid subscriptions for the year just ended.
Unpaid subscriptions for earlier years would be written off.

Answer the following questions in the question paper. Questions are printed here for
reference only.

(a) Prepare the complete subscriptions account for the year ended 31 December 2020. [7]

Additional information

For the year ended 31 December 2020

$
Profit on sale of refreshments 6 200
Purchase of equipment 10 120
Depreciation on equipment 4 050
Proceeds from sale of equipment 8 440
Profit on disposal of equipment 510
Staff costs 18 310
Other costs 3 100

(b) Prepare the income and expenditure account for the year ended 31 December 2020. [7]

(c) Advise the managing committee whether or not the new policy on unpaid subscriptions should be
continued. Justify your answer.[5]
Additional information

Inventory of refreshments was $600 at 1 January 2020 and $750 at 31 December 2020. Amounts

paid during the year to suppliers of refreshments totalled $16 000.

Amounts owing to suppliers of refreshments were $1100 at 1 January 2020 and $920 at 31
December 2020.

(d) Prepare the refreshments trading account for the year ended 31 December 2020, showing sales as the
balancing figure.
[4]

(e) State two reasons why a club or society might engage in a trading activity.

[2] [Total:

25]

ON/20/33

RX Sports is a sports club which provides sporting facilities and also sells running machines to its members.

The treasurer prepared the financial statements for the club for the year ended 31 December 2019. These
included the following.

RX Sports
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Trading account for the year ended 31 December 2019
$ $
Sales 14 800
Inventory 1 January 2019 700
Purchases 9 950
10 650
Inventory 31 December 2019 1 250
Cost of sales 9 400
Profit for the year 5 400

Income and expenditure account for the year ended 31 December 2019
$ $
Subscriptions 14 200
Profit on disposal of club equipment 600
Profit from trading account 5 400
20 200
Depreciation – computers 1 900
– club equipment 4 010
Staff costs 9 800
Rent 6 000
Other costs 1 320 23 030
Deficit for the year 2 830

The treasurer accidentally deleted the receipts and payments account from the computer before it could be
printed off. However, the following information was available.

1
at 1 January 2019 at 31 December 2019
$ $
Subscriptions paid in advance 200 600
Subscriptions in arrears 400 300
Trade receivables 5200 3740
Trade payables 1560 2910
Cash and cash equivalents 1420 ?
Net book value of computers 4800 ?

2 The club equipment which was disposed of during the year had an original cost of $7200.
Accumulated depreciation was $3100.

3 The club depreciates its computers at the rate of 25% per annum using the reducing balance method.

4 No club equipment was purchased during the year. A new computer was bought and was paid for by
cheque.

5 One month’s rent was unpaid at the year end.

6 Staff costs in the income and expenditure account included a provision for holiday pay of $160.

7 All sales and purchases of running machines were made on a credit basis.

Answer the following questions in the question paper. Questions are printed here for reference
only.

(a) Prepare the receipts and payments account for the year ended 31 December 2019. [16]
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(b) State three reasons why the difference between the total receipts and total payments in a
receipts and payments account may not equal the surplus or deficit in an income and expenditure
account.
[3]

Additional information

The credit sales of running machines to members involved the members repaying their debt in instalments.
The managing committee of the club is considering making future sales only on a cash basis.

(c) Name the financial statement in which the write-off of an irrecoverable debt arising from the sale of a
running machine to a club member would be recorded.
[1]

(d) Advise the committee whether or not future sales should only be made on a cash basis. Justify your
answer, making reference to the effect of this change on the club’s cash flow and its surplus/deficit for
the year.
[5]
MJ/20/32

The J Club prepares its accounts to 31 December annually. It also runs a shop for the exclusive use of its
members. All shop sales are made on a cash basis. The shop takings are banked on the same day.

A summary of the bank statement for the year ended 31 December 2019 is as follows.

$
Bank balance at 1 January 9 850
Bank receipts
Subscriptions received 78 650
Shop takings 49 200
Bank payments
Club administrative expenses 78 600
Shop wages 18 700
Shop expenses 9 400
Shop purchases 15 100
Bank balance at 31 December 15 900

The following balances are also available.

1 January 2019 31 December 2019

$ $
Shop inventory 1 300 1 100
Shop trade payables 2 740 2 810
Subscriptions due 1 600 1 900
Subscriptions in advance 1 200 400
Club equipment
Cost 40 000 40 000
Accumulated depreciation 32 000 ?

The bank reconciliation statement for the month of December 2019 showed that $870 representing the shop
takings on 31 December 2019 had not been credited by the bank.

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Depreciation on club equipment is to be 20% per annum using the straight-line method.

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(a) Prepare a statement to show the shop’s gross profit and profit for the year ended 31
December 2019. [4]

(b) Prepare the club’s income and expenditure account for the year ended 31 December 2019.
[5]

(c) Prepare a statement showing the movement in the club’s accumulated fund for the year
ended 31 December 2019. [3]

(d) State four differences between the financial statements of a limited company and the financial
statements of a not-for-profit organisation. [4]

Additional information

All the club equipment was purchased on 1 January 2015. The replacement cost of club equipment is
$50 000.

(e) Analyse the club’s ability to replace the club equipment in 2020. [4]

Additional information

The treasurer of the club proposes that the club could increase members’ subscriptions to finance the
replacement of club equipment.

(f) Discuss whether or not the club should increase members’ subscriptions for this purpose.
Justify your answer. [5]

Mar/20

SS Club had the following balances at 31 December.

2018 2019
$ $
Café equipment (net book value) 126 500 101 200
Furniture and fixtures (net book value) 48 200 66 560
Café inventory 13 000 ?
Subscriptions in advance 2 600 1 500
Subscriptions in arrears 3 800 4 200
Café trade payables 26 400 29 600
Café wages accrued 5 000 Nil
Cash at bank 33 500 ?

The following information related to the year ended 31 December 2019.

1 Café sales $240 000 were on a cash basis. All café takings were banked on the same day. One
quarter of the café sales were made to non-members at a gross margin of 50%. The remaining
café sales were made to members at a gross margin of 40%.

2 Café purchases were $141 000.

3 No records had been kept for ascertaining café inventory at 31 December 2019.

4 There were no purchases or disposals of café equipment.

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5 Café wages recognised in the income and expenditure account were $46 000.

Answer the following questions in the Question Paper. Questions are printed here for
reference only.

(a) Prepare the café trading account for the year ended 31 December 2019, showing clearly the
closing café inventory. [5]

Additional information

The club had prepared an income and expenditure account for the year ended 31 December 2019. The
following items were shown in the income and expenditure account.

$
Subscriptions 322 000
Administrative expenses 251 100
Depreciation: furniture and fixtures 16 640

(b) Prepare the receipts and payments account for the year ended 31 December 2019. [8]

(c) State two differences between an income and expenditure account and a receipts and payments
account.[2]
Additional information

The treasurer is aware that in early 2020, the club will receive two sums of donations from two
wealthy members. One donor intends his donation to be used for maintaining the general running of
the club in future years. The other donor intends his donation to be used for building a swimming pool
in a few years’ time.

(d) Explain the appropriate accounting treatment for the donation for:

(i) maintaining the general running of the club in future years [4]
(ii) building a swimming pool in a few years’ time. [3]

Additional information

In view of the large cash balance in the club, the committee is thinking of making a distribution to the
existing members, just like paying a dividend to shareholders in a limited company.

(e) Advise the committee whether or not the proposed distribution should be made. Justify your
answer. [3]

ON?17/32

1 The GT Boating Club is a not-for-profit organisation which collects funds by subscriptions paid
annually.

At 1 January 2016 the following assets and liabilities were held by the club:

$
Boathouse 240 000
Fixtures and fittings
Cost 15 000
Accumulated depreciation 10 000
Trade payables 1 750
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Total inventory 1 100
Bank 6 150 debit
Insurance paid in advance 1 100
Electricity owing 450
Subscriptions in arrears 600
Subscriptions in advance 400

Additional information

1 The club runs a restaurant for the exclusive use of members and their guests. During the year
ended 31 December 2016 the revenue of the restaurant was $45 000.

2 The opening restaurant inventory was 75% of the total club inventory. The closing restaurant
inventory had doubled at 31 December 2016.

3 During the year ended 31 December 2016 the club paid $28 350 for restaurant purchases.

All the club’s trade payables at 1 January 2016 related to the restaurant suppliers. This had risen by
20% at 31 December 2016.

4 The club paid insurance for the year of $4800 and electricity of $2000. Half of these costs are charged
to the restaurant.
At 31 December 2016 the club still owed $950 for insurance.

REQUIRED

(a) Prepare a statement to calculate the restaurant profit for the year ended 31 December 2016. The
statement should also clearly show the gross profit. [10]

Additional information

Another local boating club runs a similar restaurant. Its latest accounts showed that the restaurant had
achieved a gross margin of 45%.

REQUIRED

(b) (i) Calculate the difference between the gross margins of both restaurants. [2]

(ii) Discuss three actions which the club could take to improve the gross margin. [6]

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Additional information

The club is now considering the introduction of a life membership subscription.

The annual subscription is $100 and the proposed life subscription would be $1000.

Gurmukh, a retired gentleman, is considering joining the club and seeks your advice on whether or not he
should pay an annual subscription or the life membership.

REQUIRED

(c) Explain the accounting treatment of the life subscriptions. [2]

(d) Advise Gurmukh whether or not he should become a life member. Justify your advice. [5]

ON/17/31

1 The EF Tennis Club generates revenue from member subscriptions by selling tickets for matches and
operating a club shop. It also receives income from renting out their catering facility.

The treasurer has provided the following figures for the year ended 31 December 2016:

Receipts and Payments Account

2016 $ 2016 $
Jan 1 Balance b/d 1 546 Dec 31 New equipment 1 400
Dec 31 Shop sales 8 960 Shop purchases 5 720
Match tickets 2 740 Printing and advertising
Sale of old equipment 1 760 for matches 3 765
Rent of catering facilities 2 600 Ground staff wages 4 210
Subscriptions 3 600 Shop staff wages 2 200
Donation 5 000 Balance c/d 8 911
26 206 26 206
2017
Jan 1 Balance b/d 8 911

Other balances are:

1 January 2016 31 December 2016

$ $
Shop inventory 975 826
Equipment at net book value 14 760 ?
Shop trade payables 1 210 1 450

REQUIRED

(a) Distinguish between the capital of a sole trader and the accumulated fund of a non-profit-
making club or society.
[2]

(b) Prepare the shop income statement for the year ended 31 December 2016. [4]

Additional information

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1 Equipment is depreciated at 10% of net book value at the year end. Equipment which was sold had
a net book value of $1900.
2 The rent received for the catering facility is $200 per month and commenced on 1 January 2016.
3 The annual subscription for the year ended 31 December 2016 was $9 per member. On 1
January 2017 it was increased to $10 per member.
At 1 January 2016:
20 members had paid their subscription in advance for 2016.
There were 6 members in arrears for 2015. Their membership has been withdrawn and the
amount they owed is to be written off as a bad debt.
At 31 December 2016:
26 members paid their subscription in advance for 2017.
10 members were in arrears for 2016 and they had until 30 June 2017 to pay.
4 The donation of $5000 was received specifically to start a new fund for a club-house. The
treasurer would like to invest this in a separate long-term savings account.

(c) Prepare the income and expenditure account for the year ended 31 December 2016. [10]

(d) Prepare an extract from statement of financial position at 31 December 2016 to show the current
assets and current liabilities of the club.
[4]

(e) Discuss whether or not the treasurer should invest the fund for the club-house in a separate long-term
savings account. Justify your answer.
[5]

ON/17/33

The RS Rowing Club is a not-for-profit organisation.

A summary of the club’s receipts and payments account for the year ended 31 March 2017 is as follows:

Receipts and payments account

$ $
Balance b/d 4 370 Purchases of sports equipment 1 624
Members’ subscriptions 10 300 Rent of boathouse 2 800
Sales of sports equipment 1 850 General expenses 1 379
Entry fees for annual boat race 4 200 Wages 3 500
Prizes for annual boat race 325
Expenses of annual boat race 2 456
Balance c/d 8 636
20 720 20 720

Additional information

1 The club owns boats which had originally cost $24 000. Accumulated depreciation at 1 April
2016 was $11 200. The depreciation policy is to charge 10% per annum using the reducing balance
method.

2 The club also sells sports equipment to its members. Inventory of sports equipment was as follows:
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$
1 April 2016 364
31 March 2017 429

3 Members’ subscriptions in arrears and paid in advance were as follows:

1 April 2016 31 March 2017

$ $
Members’ subscriptions in arrears 700 650
Members’ subscriptions in advance 350 450

4 The balance on the accumulated fund on 1 April 2016 was $40 614.

REQUIRED

(a) Identify four terms used only in the financial statements of a not-for-profit organisation with the
corresponding terms used in the financial statements of a profit-making business. [4]

(b) Prepare the income and expenditure account for the year ended 31 March 2017. [8]

(c) Prepare an extract from the statement of financial position at 31 March 2017 showing the accumulated
fund of the club at that date.[2
(d) Additional information

The club has decided to introduce a scheme offering life membership for payment of $400. Annual
subscription fees are currently $50. The club members think that the life membership fees should be
credited in full to the income and expenditure account when received. The treasurer has suggested that
the life membership payments should be credited to income and expenditure account over a number of
years.

REQUIRED

(e) Discuss the correct accounting treatment for the life membership. [4]

Additional information

A former member has donated $35 000 to the club. The funds are to be invested and the investment income
used to encourage young people to train for national competitions. The club is considering two investment
options.

1 Invest for 3 years at an annual fixed interest rate of 7.5%.

2 Use the funds to build its own boathouse. Part of the new boathouse could be rented to another
local group at an annual rent of $1250.

REQUIRED

(f) Recommend which option the club should select. Support your answer with reasons and relevant
calculations.
[7]

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Mar/17

The AB Cricket Club prepares its financial statements annually.

REQUIRED

(a) Identify three differences in the terminology used in the financial statements of a club compared to a
profit-making organisation.
[3]

Additional information

The club runs a small snack bar. The following information is available for the year ended 31
December 2016.

1 The snack bar takings for the year totalled $52 750.

2 The food inventory was valued at $260 at 1 January 2016. This had been reduced by 40% at 31
December 2016.

3 All food is purchased from one supplier. The supplier was paid $33 785 during the year.

4 At 1 January 2016 the supplier was owed $460. There was $585 owing to the supplier at 31
December 2016.

REQUIRED

(b) Prepare the snack bar trading account for the year ended 31 December 2016. [6]

Additional information

1 The annual subscription per member has remained at $250 for many years.

2 There are currently 310 members. There were no resignations or new members joining during
2016.

3 At 31 December 2015, there were 7 members who had not paid their 2015 subscription and 2 members
who had paid their subscriptions for 2016.

4 At 31 December 2016, there were 12 members who had not paid their 2016 subscription and 3 members
who had paid their 2017 subscription.

REQUIRED

(c) Prepare the subscriptions account for the year ended 31 December 2016. [7]

Additional information

The club buildings are in urgent need of repairs. The committee has decided to carry out the required
work during 2017.

The club is proposing a scheme whereby local businesses are invited to sponsor matches. At 31

December 2016 there was a small debit balance on the bank account.

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REQUIRED

(d) Identify four actions other than sponsorship that could be taken by the club to fund the repairs of
the buildings. [4]

(e) State the advantages and disadvantages to the club if the proposed sponsorship is adopted.

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