Statement of Profit or Loss for Trading Activities (Cambridge (CIE) A Level Accounting): Revision Note
Exam code: 9706
Statements of profit or loss for clubs & societies
Why might clubs and societies prepare statements of a profit or loss?
Statements of profit or loss are prepared when the club or society involves a trading activity which buys and sells goods to raise extra money
A separate statement of profit or loss is prepared for each trading activity
The profits or losses made from the trading activities are transferred to the income and expenditure account
What is included in the statements of profit or loss for trading activities?
The statement of profit or loss is very similar to that of other businesses
Some expenses might be apportioned between the trading activity and the club
For example, 40% of the heating and lighting might be charged to a shop and the other 60% is charged to the club
It is important that only expenses relating to the trading activity are included
The other expenses will appear on the income and expenditure account
Worked Example
Paramount Badminton Club owns badminton courts. It also operates a shop where it sells refreshments and badminton equipment. Shop sales are on a cash basis and purchases made for the shop are on credit.
The treasurer of the club provided the following information.
| 1 January 2023 | 31 December 2023 |
$ | $ | |
Subscriptions in advance | 2 200 | 2 050 |
Subscriptions in arrears | 6 515 | 6 850 |
Total shop trade payables | 5 375 | 5 950 |
Shop inventory | 3 600 | 3 200 |
Balance at bank | 360 | 220 |
Other information provided for the year ended 31 December 2023:
Shop sales | 48 120 |
Subscriptions received during the year | 38 700 |
Shop purchases | 36 200 |
Shop purchases returns | 2 710 |
Shop wages | 4 820 |
Wages for the club caretakers | 2 650 |
Rent | 3 640 |
Bank charges for the club | 80 |
Telephone for the club | 380 |
Advertising for the club | 460 |
Depreciation of equipment for the shop | 520 |
Rent is apportioned 40% to the shop and 60% to the club.
Prepare the shop statement of profit or loss for the year ended 31 December 2023.
Answer:
Only income and expenses related to the shop appear on the shop's statement of profit or loss
Do not include anything that is for the club in general such as subscriptions
Find the portion of rent to charge to the shop
40% × $3 640 = $1 456
Paramount Badminton Club Shop Statement of Profit or Loss for the year ended 31 December 2023 | ||
$ | $ | |
Shop sales | 48 120 | |
Less: Cost of sales | ||
Opening Inventory | 3 600 | |
Purchases | 36 200 | |
39 800 | ||
Purchases returns | (2 710) | |
37 090 | ||
Closing inventory | (3 200) | 33 890 |
| 14 230 | |
Less: Expenses | ||
Wages | 4 820 | |
Rent | 1 456 | |
Depreciation of equipment | 520 | (6 796) |
Shop profit | 7 434 | |
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