Financial Statements for Clubs & Societies (Cambridge (CIE) IGCSE Accounting): Flashcards
Exam code: 0452 & 0985
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What kind of organisation is a club or society, and how is it funded?
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What kind of organisation is a club or society, and how is it funded?
A non-trading organisation, which does not exist to make a profit.
It provides a service or facility to its members for a fee called a subscription.
Which accounting records do clubs and societies usually keep?
Clubs and societies tend to keep:
a receipts and payments account
a statement of profit or loss for each trading activity
an income and expenditure account
a subscriptions account
a statement of financial position
Why would a club prepare a statement of profit or loss at all?
Because it runs a trading activity, such as a shop or a café, that buys and sells goods to raise extra money.
A separate statement is prepared for each trading activity the club runs.
Complete the sentence about a club's trading activity:
A profit from a trading activity is transferred to the income and expenditure account as
, and a loss is transferred there as .The completed sentence is:
A profit from a trading activity is transferred to the income and expenditure account as income, and a loss is transferred there as expenditure.
True or False?
A club's trading statement of profit or loss always shows a gross profit.
False.
The gross profit is not always worked out separately. The statement often runs from the sales straight through to the profit for that activity after its own direct costs.
Which costs belong in a club shop's statement of profit or loss?
Only the shop's own costs, such as its purchases and the wages of the people who work in it.
General club costs like insurance and the caretakers' wages stay out of it.
A club shop has sales of $48 120 and a cost of sales of $33 890, with shop wages of $4820. What is the shop profit?
$9410.
The sales less the cost of sales give $48 120 − $33 890 = $14 230, and $14 230 − $4820 = $9410.
What does a subscriptions account work out?
The amount of subscriptions that relates to the financial year, whatever was actually received during it.
That figure is then transferred to the income and expenditure account.
True or False?
A subscriptions account can have a balance on both sides at the same time.
True.
Some members are in arrears while others have paid in advance, and the two are carried down on opposite sides.
Complete the sentence about the two balances:
Subscriptions in arrears are an
to the club, while subscriptions paid in advance are a .The completed sentence is:
Subscriptions in arrears are an asset to the club, while subscriptions paid in advance are a liability.
Why are subscriptions paid in advance a liability?
Because the club has taken money for a period it has not yet provided the facilities for.
Until it does, it owes those members either the service or their money back.
Members pay $10 a month and at the year end eight members owe for December. What is the accrual, and which side is it carried down on?
$80, since 8 × $10 = $80.
It is carried down on the credit side, so that it opens on the debit side next year as an asset.
A member's unpaid subscription is written off. How is that recorded in the subscriptions account?
It is credited to the subscriptions account, which takes it out of the amount shown as owing.
The club has accepted that the money will never be received.
Subscriptions of $3730 were received, with arrears of $60 at the start and $80 at the end, and advances of $90 at the start and $240 at the end. What goes to the income and expenditure account?
$3600.
Working from the amount received: $3730 − $60 + $90 + $80 − $240 = $3600.
Define receipts and payments account.
A receipts and payments account is a club's simple cash book.
It records money coming in and money going out, without separating cash from bank transactions.
Which side of a receipts and payments account are amounts received entered on?
The debit side, exactly as in a cash book.
Amounts paid out are entered on the credit side.
True or False?
Buying new equipment for the club appears in the receipts and payments account.
True.
It records all money paid out, whether the spending is capital or revenue. Buying golf carts appears there just as the wages do.
What does the closing balance of a receipts and payments account represent?
The club's bank balance or cash in hand at the end of the year.
It is simply what is left of the money, carried down like any other cash book balance.
A club opened the year with $4120 in the bank, received $79 950 and paid out $69 180. What is the closing balance?
$14 890.
The debit side totals $4120 + $79 950 = $84 070, and $84 070 − $69 180 = $14 890.
Define the income and expenditure account.
The income and expenditure account works out a club's surplus or deficit for the year.
It does the same job for a club that a statement of profit or loss does for a business.
Complete the sentence about a club's result for the year:
When the income is greater than the expenditure there is a
, and when it is less there is a .The completed sentence is:
When the income is greater than the expenditure there is a surplus, and when it is less there is a deficit.
Why do clubs use the words surplus and deficit rather than profit and loss?
Because a club does not operate in order to make a profit.
Surplus and deficit are the non-trading equivalents of profit and loss.
What does an income and expenditure account include that a receipts and payments account does not?
Non-monetary items such as depreciation, and adjustments for accruals and prepayments.
A receipts and payments account records only money that has actually moved.
Which receipts and payments never reach the income and expenditure account?
Capital ones, such as the purchase of equipment.
The income and expenditure account contains only revenue income and expenditure.
Which adjustments are made when preparing an income and expenditure account?
Depreciation of the non-current assets, accruals and prepayments of both expenses and income, and any subscriptions written off.
Why are a club shop's wages left out of the income and expenditure account?
Because they have already been charged in the shop's own statement of profit or loss.
Including them again would count the same cost twice, since only the shop's profit is brought across.
Define the accumulated fund.
The accumulated fund is a club's equivalent of capital.
It is made up of any capital invested in the organisation, plus the surpluses of income over expenditure built up over time.
How does a club's statement of financial position differ from a business's?
The capital section is replaced by an accumulated fund section.
The assets and liabilities are set out in the same way as they are for any other organisation.
True or False?
A deficit reduces a club's accumulated fund.
True.
A surplus is added to the accumulated fund and a deficit is subtracted from it, just as a profit or a loss changes a sole trader's capital.
Complete the equation used to find a club's accumulated fund when it is not given:
Accumulated fund =
− .The completed equation is:
Accumulated fund = assets − liabilities.
This is the accounting equation with the accumulated fund taking the place of capital.
How can the surplus or deficit be found from two statements of financial position?
Work out the accumulated fund at the start of the year and at the end, then take the change between them.
An increase is a surplus and a decrease is a deficit.
A club's assets are $2410 and its liabilities $80 at the year end, and its accumulated fund was $2200 at the start. What is the surplus?
$130.
The closing accumulated fund is $2410 − $80 = $2330, and $2330 − $2200 = $130.
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