3.1.3 Clubs and Societies

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Accounting Full Scale Course

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Distinction Between Receipts and Payments Account vs Income and Expenditure Account

Receipts and Payments Account

• Cash-based statement (similar to cash book summary).
• Records all cash received and paid in the accounting period, whether capital or revenue, current or prior years.
• No distinction between revenue and capital.
• Non-cash items excluded (e.g., depreciation).
• Closing balance represents cash/bank balance at year-end.

Format Example:
Receipts and Payments Account for 2024

Receipts	$	Payments	$
Balance b/d	5,000	Rent	12,000
Subscriptions received	20,000	Wages	6,000
Donations	3,000	Stationery	1,000
Sale of raffle tickets	2,000	Equipment purchased	3,000
		Balance c/d	8,000
Total	30,000	Total	30,000

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Income and Expenditure Account

• Accrual-based statement (like Income Statement).
• Includes only revenue items relating to current year.
• Excludes capital receipts/payments.
• Adjusts for accruals, prepayments, depreciation.
• Closing balance represents surplus or deficit for the year.

Format Example:
Income and Expenditure Account for 2024

Income	$	Expenditure	$
Subscriptions (adjusted)	21,000	Rent	12,000
Donations (revenue)	3,000	Wages	6,000
Profit from raffle	1,500	Depreciation	2,000
		Stationery	1,000
Surplus	3,500
Total	25,500	Total	25,500

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Accumulated Fund

Definition

• Equivalent of “capital” for a non-profit organisation.
• Represents net assets at the beginning of the accounting period.
• Adjusted each year by surplus/deficit.

Formula

Accumulated Fund = Total Assets – Total Liabilities

Example:
Assets = $60,000, Liabilities = $15,000 → Accumulated Fund = $45,000

If surplus for year = $5,000 → Closing Accumulated Fund = $50,000.

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Preparation of Accounts from Full or Incomplete Records

1. Receipts and Payments Account

• Prepared from cash and bank records.
• Summarises all inflows and outflows.

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2. Accounts for Trading/Revenue-Generating Activities

Some clubs run trading activities (canteen, bar, sports shop).
Prepared like Trading Account.

Example: Bar Trading Account

Particulars	$
Opening inventory	2,000
Purchases	8,000
Less: Closing inventory	(3,000)
Cost of sales	7,000
Sales	12,000
Profit transferred to Income & Expenditure	5,000

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3. Subscriptions Account

• Used to adjust for prepaid and outstanding subscriptions.
• Ensures correct figure transferred to Income & Expenditure Account.

Example:
Subscriptions received during year = 20,000
Outstanding end = 2,000, Prepaid beginning = 1,000, Prepaid end = 500
Income for year = 20,000 + 2,000 – 1,000 – 500 = 20,500

T-account format:

Subscriptions A/c

Dr	$	Cr	$
Bank (received)	20,000	Income & Expenditure	20,500
Prepaid c/d	500	Outstanding b/d	1,000
		Outstanding c/d	2,000
Total	20,500	Total	20,500

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4. Income and Expenditure Account

• Prepared after adjusting subscriptions, trading accounts, donations, and expenses.
• Includes non-cash items like depreciation, provision for doubtful debts.

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5. Statement of Financial Position

• Same format as company balance sheet.
• Capital replaced by Accumulated Fund.
• Includes non-current assets, current assets, liabilities.

Example (31 Dec 2024):

Assets	$	Liabilities & Fund	$
Equipment (net)	20,000	Accumulated Fund b/d	45,000
Inventory (bar)	3,000	Surplus for year	5,000
Subscriptions outstanding	2,000	Total Accumulated Fund	50,000
Cash & bank	7,000	Creditors	7,000
Total assets	32,000	Total	57,000

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Other Receipts

Life Membership Fees

• Lump sum paid by members for lifetime membership.
• Treatment options:
  • Capital approach: Transfer to Accumulated Fund (if significant).
  • Revenue approach: Treat as income in year received.
  • Hybrid approach: Spread over estimated life of membership.

Example: Life membership = $6,000, estimated 10 years → Income per year = 600. Remaining 5,400 carried forward as liability.

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Donations

• General donation → Revenue income (in Income & Expenditure).
• Specific donation (for building, equipment) → Capital receipt added to Accumulated Fund.

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Adjustments to Financial Statements (as per 1.5.1)

• Prepayments and accruals of expenses.
• Depreciation of assets.
• Provision for doubtful debts.
• Inventory adjustments for trading activities.

Example:
Insurance paid 6,000 (including 1,000 prepaid).
Income & Expenditure charge = 5,000.
Prepaid balance carried to SOFP as asset.

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Evaluation of Sources of Finance and Fundraising

Internal Sources

• Subscriptions: Regular, stable, but may not cover large expenses.
• Life membership fees: Provide long-term funding, but one-off.
• Surplus from trading activities: Clubs with bars/cafés often rely on this.

External Sources

• Donations & Sponsorships: Can be large, but not guaranteed every year.
• Government Grants: Useful for community projects, subject to approval.
• Bank Loans/Overdrafts: Provide immediate funds, but increase liabilities.

Fundraising Methods

• Events (raffles, charity dinners, sports tournaments).
• Merchandising (club shirts, equipment).
• Online crowdfunding and membership drives.

Evaluation:

• Stable finance = subscriptions + trading surpluses.
• Large capital projects = donations, grants, loans.
• Over-reliance on one source = risky; diversification is best practice.

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Summary Table – Clubs and Societies Accounts

Account	Purpose	Key Points
Receipts & Payments	Cash-based, all inflows/outflows	Balance = cash/bank
Income & Expenditure	Accrual-based, revenue only	Balance = surplus/deficit
Accumulated Fund	Net worth of club	Opening = assets – liabilities
Trading Account	For bar/shop etc.	Profit transferred to I&E
Subscriptions	Adjusts prepaid/outstanding	Ensures correct income
SOFP	Final position	Includes fund, assets, liabilities

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Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Accounting Full Scale Course

3.1.3 Clubs and Societies – Exam-Style Worked Example

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Accounting Full Scale Course

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Scenario

The Sports Club provides the following information for the year ended 31 Dec 2024:

• Subscriptions received during year: $20,000
• Subscriptions outstanding (1 Jan): $1,200
• Subscriptions outstanding (31 Dec): $1,500
• Subscriptions prepaid (1 Jan): $800
• Subscriptions prepaid (31 Dec): $600

Other items:

• Donations (general): $4,000
• Life membership fee received: $6,000 (to be spread over 6 years)
• Bar Trading Account:
  • Sales: $25,000
  • Purchases: $15,000
  • Opening inventory: $2,000
  • Closing inventory: $3,000

Expenses:

• Rent: $12,000 (includes $2,000 prepaid)
• Wages: $8,000
• Printing & Stationery: $2,000
• Depreciation of equipment: $3,000

Statement of Financial Position at 1 Jan 2024:

• Equipment (net): $30,000
• Inventory (bar): $2,000
• Subscriptions outstanding: $1,200
• Cash at bank: $5,000
• Creditors (for bar purchases): $3,000
• Accumulated Fund (balancing figure).

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Step 1: Subscriptions Account

Dr	$	Cr	$
Bank (received)	20,000	Prepaid b/d	800
Prepaid c/d	600	Income & Expenditure	20,100
		Outstanding b/d	1,200
		Outstanding c/d	1,500
Total	20,600	Total	20,600

Subscriptions income for 2024 = 20,100

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Step 2: Bar Trading Account

Particulars	$
Sales	25,000
Less: Cost of sales
Opening inventory	2,000
Purchases	15,000
Less: Closing inventory	(3,000)
Cost of sales	14,000
Profit transferred to Income & Expenditure	11,000

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Step 3: Income and Expenditure Account for year ended 31 Dec 2024

Income	$	Expenditure	$
Subscriptions	20,100	Rent (12,000 – 2,000 prepaid)	10,000
Donations	4,000	Wages	8,000
Bar profit	11,000	Printing & Stationery	2,000
Life membership (6,000 ÷ 6)	1,000	Depreciation (equipment)	3,000
Total Income	36,100	Total Expenditure	23,000
Surplus for year	13,100

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Step 4: Statement of Financial Position as at 31 Dec 2024

Assets

• Equipment = 30,000 – 3,000 = 27,000
• Inventory (bar) = 3,000
• Subscriptions outstanding = 1,500
• Prepaid rent = 2,000
• Cash & bank = balancing figure

Liabilities

• Creditors = 3,500 (assume increase from year-end purchases)
• Life membership fee (unearned portion) = 5,000 (6,000 – 1,000 recognised)

SOFP

Assets	$	Liabilities & Fund	$
Equipment (net)	27,000	Creditors	3,500
Inventory (bar)	3,000	Life membership fund	5,000
Subscriptions outstanding	1,500	Accumulated Fund b/d	35,200
Prepaid rent	2,000	Surplus for year	13,100
Cash & bank	23,400	Closing Accumulated Fund	48,300
Total Assets	56,900	Total	56,900

(Accumulated Fund b/d = Assets – Liabilities at start = (30,000+2,000+1,200+5,000) – 3,000 = 35,200)

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Step 5: Exam-Style Commentary

• Subscriptions income was adjusted correctly for prepayments and arrears, ensuring accurate accrual accounting.
• Life membership fee spread over 6 years prevents overstatement of current year’s income.
• Bar operations are profitable, contributing $11,000 to surplus.
• Surplus of $13,100 increased the Accumulated Fund significantly (from 35,200 → 48,300).
• SOFP shows healthy cash reserves (23,400) and a low gearing position (creditors only 3,500).

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Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Accounting Full Scale Course

3.1.3 Clubs and Societies – Exam-Style Incomplete Records Case

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Accounting Full Scale Course

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Scenario

The Social Club provides the following information:

Balances at 1 Jan 2024

• Equipment (net): $40,000
• Inventory (canteen): $3,000
• Subscriptions outstanding: $1,500
• Subscriptions prepaid: $1,000
• Cash & bank: $2,000
• Creditors: $4,000
• Accumulated Fund (balancing figure).

During 2024:

• Cash received from subscriptions: $18,500
• Donations received: $3,000
• Cash sales from canteen: $30,000
• Payments:
  • Purchases (canteen): $20,000
  • Rent: $10,000
  • Wages: $7,500
  • Insurance: $2,400 (includes $400 prepaid for 2025)
  • Printing & Stationery: $1,600

Additional Information (31 Dec 2024):

• Subscriptions outstanding: $2,000
• Subscriptions prepaid: $800
• Inventory (canteen): $2,500
• Creditors: $4,500
• Depreciation of equipment: 10% of cost ($40,000).

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Step 1: Reconstruct Subscriptions Account

Dr	$	Cr	$
Bank (received)	18,500	Prepaid b/d	1,000
Prepaid c/d	800	Outstanding b/d	1,500
		Outstanding c/d	2,000
		Income & Expenditure	18,800
Total	19,300	Total	19,300

Subscriptions income = 18,800

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Step 2: Canteen Trading Account

Particulars	$
Sales	30,000
Less: Cost of Sales
Opening inventory	3,000
Purchases	20,000
Less: Closing inventory	(2,500)
Cost of Sales	20,500
Profit transferred to I&E	9,500

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Step 3: Income & Expenditure Account for year ended 31 Dec 2024

Income	$	Expenditure	$
Subscriptions	18,800	Rent	10,000
Donations	3,000	Wages	7,500
Canteen profit	9,500	Insurance (2,400 – 400 prepaid)	2,000
		Printing & Stationery	1,600
		Depreciation (40,000 × 10%)	4,000
Total Income	31,300	Total Expenditure	25,100
Surplus for year	6,200

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Step 4: Statement of Financial Position as at 31 Dec 2024

Assets:

• Equipment (40,000 – 4,000) = 36,000
• Inventory (canteen) = 2,500
• Subscriptions outstanding = 2,000
• Prepaid insurance = 400
• Cash & bank (balancing figure) = 2,200

Liabilities:

• Creditors = 4,500
• Subscriptions prepaid = 800

Accumulated Fund:
Opening Fund = (Assets – Liabilities at 1 Jan)
= (40,000 + 3,000 + 1,500 + 2,000) – (4,000 + 1,000)
= 46,500 – 5,000 = 41,500

Closing Fund = Opening + Surplus
= 41,500 + 6,200 = 47,700

SOFP

Assets	$	Liabilities & Fund	$
Equipment (net)	36,000	Creditors	4,500
Inventory (canteen)	2,500	Subscriptions prepaid	800
Subscriptions outstanding	2,000	Accumulated Fund	47,700
Prepaid insurance	400
Cash & bank	12,100
Total	53,000	Total	53,000

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Step 5: Exam-Style Commentary

• Subscriptions income correctly adjusted despite incomplete records (18,800 vs 18,500 received).
• Canteen profitable (9,500 surplus) → strong internal revenue stream.
• Surplus of 6,200 increased Accumulated Fund from 41,500 to 47,700.
• SOFP shows a healthy cash position (12,100) and moderate creditor balance (4,500).
• Prepaid insurance ensures expenses not overstated.
• Depreciation policy ensures equipment value realistically stated.

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Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change A2 Level Accounting Full Scale Course