Clubs And Societies (Copy)

5.4 Clubs and Societies

Nature of Clubs and Societies

• Clubs and societies are non-profit organisations such as sports clubs, charities, and social groups.
• Their primary purpose is to provide services to members, not to earn profit.
• They prepare different financial statements from businesses:
  • Receipts and Payments Account
  • Income and Expenditure Account
  • Statement of Financial Position

Receipts and Payments Account

• A Receipts and Payments Account is similar to a cash book.
• It records all cash and bank transactions during the financial year.
• It is a summary of actual cash received and paid.
• It includes both capital and revenue items, and both current and previous year’s receipts/payments.

Features:

• Prepared on a cash basis
• Opening balance is cash/bank at the beginning of the period
• Closing balance is cash/bank at the end of the period
• No adjustments made for accruals, prepayments, or depreciation

Example (Extract):

Income and Expenditure Account

• The Income and Expenditure Account is similar to the income statement of a business.
• It is prepared on an accrual basis, showing income and expenses relating to the current accounting period only.
• Capital items and balance brought forward are not included.
• Adjustments are made for:
  • Accrued and prepaid expenses
  • Depreciation
  • Outstanding income

Format:

Income and Expenditure Account for the Year Ended 31 December 20XX

Surplus = 8,700 − 8,600 = 100

Or:
Deficit if expenditure > income

Revenue-Generating Activities

• Many clubs run activities such as:
  • Refreshment stalls
  • Events
  • Match ticket sales
• Accounts are prepared for each activity separately to calculate profit or loss from that activity

Example: Refreshments Account

Subscriptions

• Subscriptions may be:
  • Received in advance (prepaid)
  • Outstanding (accrued)
• Adjustments are made in the Income and Expenditure Account

Formula:

Subscriptions Income =
= Subscriptions received

• Subscriptions in arrears (current year)
  − Subscriptions in arrears (previous year)
  − Subscriptions in advance (current year)
• Subscriptions in advance (previous year)

Statement of Financial Position (Balance Sheet)

• Similar to a business balance sheet but with accumulated fund instead of capital
• Prepared at year-end showing:
  • Assets (cash, equipment, subscriptions due)
  • Liabilities (outstanding expenses, subscriptions received in advance)
  • Accumulated Fund = balancing figure (like capital)

Format:

Statement of Financial Position as at 31 December 20XX

Accumulated Fund = Assets − Liabilities = 5,400 − 300 = 5,100

Accumulated Fund

• It is the capital of a non-profit organisation
• Represents the net worth of the club or society
• Calculated as:

Accumulated Fund = Total Assets − Total Liabilities

• If a previous year’s Statement of Financial Position is available:
  • Closing Accumulated Fund = Opening Accumulated Fund ± Surplus/Deficit for the year

Adjustments Required (Same as Sole Traders)

• Accrued and prepaid expenses/income
• Depreciation of non-current assets
• Irrecoverable debts and provision for doubtful debts (if applicable)
• Valuation of inventory (e.g., remaining refreshments stock)