Demystifying Accounting…
ACCOUNTS OF CLUBS
Introduction
 The main aim of a business is to earn a profit whereas the main aim of a non-trading
organization is to provide facilities and services.
 Most clubs and societies do not employ trained bookkeepers as their Honorary Treasures.
 Their accounting records are invariably incomplete and techniques used in incomplete records
are required for the preparation of their annual accounts.
Main features of non-profit making organizations
a. An Income and Expenditure account replaces the Profit and Loss account.
b. A trading account is only prepared for a subsidiary activity-the activity may be in the nature of
trading and carried on to supplement the income of the club.
c. In the Income and Expenditure account
 ‘Surplus of income over expenditure’ replaces net profit.
 ‘Excess of expenditure over income’ replaces net loss.
d. In the balance sheet ‘Accumulated Fund’ replaces capital account found in the accounts of a
sole trader.
Members’ subscriptions
 The total subscriptions credited to the Income and Expenditure account is calculated as follows:
Annual subscription per member X Number of members
 If this information is not available prepare a Total Subscriptions account.
 The subscriptions shown in the Income and Expenditure account must be subscriptions relating
to the period of time covered by the account-this is an application of the matching concept.
 The amount received is adjusted for accruals and prepayments in the ledger.
i.
Subscriptions owing are shown as a current asset in the balance sheet.
ii.
Subscriptions received in advance are shown as a current liability in the balance sheet.
NB
 Subscriptions are an item of income from the organization’s point of view.
 It is possible to have two balances in the subscriptions account as some members may be in
arrears and others have paid in advance.
Illustration
During the year ended 30 June 2006 the Tashinga Drama Club received subscriptions totaling $3 900,
which included $90 relating to the next accounting period. On 30 June 2006 members owed $180
subscriptions for the current financial year.
Leonard Maposa (AccountingCoach): 0774741041
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Demystifying Accounting…
During the year ended 30 June 2007 the Tashinga Drama Club received subscriptions totaling $4 200,
which included$70 relating to the next financial year. There were no subscriptions outstanding for the
year ended 30 June 2007.
Required: Prepare the subscriptions account for each the years ended 30 June 2006 and 30 June 2007.
The following financial information is available as at 1 June 2002:
Members’ subscriptions – in arrears $4 000
in advance $5 600
Members’ subscriptions received during the year amounted to $200 900. At 31 May 2003 there were
members’ subscriptions in arrears of $3 500 and members’ subscriptions for 2003/2004 of $7 900.
Required: Prepare the subscriptions account for the year ended 31 May 2003
Trading account
 Some non-trading organizations do carry out regular trading activity in order to supplement
their subscription income – but this is not the main purpose of the organization.
 Many clubs and societies have a café, a shop, a bar etc where goods are bought and sold.
 For any activity which constitutes trading, a separate trading account should be prepared and
the profit/loss on that account transferred to the Income and Expenditure.
Illustration
The SuccessMotivation Club was formed some years ago. The club has a café where soft drinks,
beverages and confectionery are on sale to members and visitors. The following information is available
for the year ended 30 June 2006.
$
Stock
- 1 July 2005
350
-
440
30 June 2006
Sales
3 500
Purchases
1 620
Wages paid to part-time café assistant 1 000
Required: Prepare the Trading account for the café’ for the year ended 30 June 2006.
Donations made to the Club
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Demystifying Accounting…
 The treatment of a donation, legacy etc made to the club will depend upon the purpose for
which they are made.
 If the donation is simply to add to the club’s funds, it may be credited to the Income and
Expenditure account.
 If the donation is given for a special purpose (such as provision of a clubhouse) credit the
donation to a special fund account - and not accumulated fund.
NB:
The wishes of the donor must be respected, and the donation should not be used for any other purpose.
Life subscriptions and Entry Fees
 These are lump sums paid by the members.
 When received they should be credited to Deferred Income account and credited to the Income
and Expenditure account in equal installments over such a period determined by the Committee
– this is an application of the matching concept.
The following information was extracted from the books of Chiedza Farmers
2003, June 1
2004, May 31
$
$
Subscriptions in arrears
5 400
4 800
Subscriptions in advance
3 750
4 250
Stock of stationery
1 220
960
Electricity owing
-
1 100
The following transactions were undertaken during the year ending 31 May 2004
i.
Subscriptions paid by cheque amounted to $15 000
ii.
Subscriptions paid in cash totaled $3 000.
iii.
Paid $6 000 for stationery by cheque.
iv.
Paid $3 400 for electricity.
You are required to prepare
a.
The subscriptions account. (7)
b.
The stationery account. (4)
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Demystifying Accounting…
c.
The electricity account. (4)
Pay special attention to dates and detail.
Balance the accounts on 31 May 2004.
The Netherdale Sports Club’s Receipts and Payments Account shows the following transactions for the
year ended 30 April 2006.
$
RECEIPTS
$
PAYMENTS
Balance b/d
20 000
National club fees
3 000
Subscriptions
72 000
Restaurant supplies
51 000
Restaurant takings
108 000
Purchase of clubhouse
50 000
Annual dance
8 900
Loan interest
2 200
Sale of equipment
6 000
Purchase of equipment
14 000
Restaurant wages
22 000
Repairs and maintenance
12 400
Annual dance
4 950
Loan to purchase clubhouse 20 000
Administration of annual dance
Electricity
11 000
General wages
60 000
Balance c/d
4 030
234 900
Balance b/d
320
234 900
4 030
When the club’s bank statements for the year ended 30 April 2006 were studied, the following were
discovered.
(i)
Bank interest of $100 for the year had been credited in the bank statement but no entry
appeared in the receipts and payments account.
(ii)
Electricity was paid by direct debit at $1000 per month but the entry for January 2006 had been
omitted from the receipts and payments account.
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Demystifying Accounting…
(iii)
$4000 had been banked for restaurant takings on 30 April 2006. This had been entered in the
receipts and payments account but did not appear on the bank statement.
(iv)
A cheque for $2800 for repairs and maintenance, posted on 29 April 2006, was
included in the receipts
Required
(a)(i)
(ii)
Update the Netherdale Sports Club’s Receipts and Payments Account. [2]
Prepare a bank reconciliation statement at 30 April 2006 to reconcile the bank statement with
the updated receipts and payments balance.
Additional information:
(i)
Net book value of the equipment owned on 1 May 2005 was $56 000 and the equipment sold
during the year ended 30 April 2006 had a net book value of $4000.
(ii)
Depreciation on equipment is provided at 20 % reducing (diminishing) balance, with a full year’s
depreciation written off in the year of purchase and none in the year of sale.
(iii)
The club’s other assets and liabilities were as follows:
1 May 2005
30 April 2006
$
$
Restaurant stock
7 600
9 400
Creditors for restaurant supplies
4 400
5 200
Subscriptions in arrears
-
1 800
Subscriptions in advance
2 000
1 400
Fixtures and fittings
21 400
20 800
There were no purchases or sales of fixtures and fittings during the year.
Reqiured
(b)(i)
Prepare a Restaurant Trading Account for the year ended 30 April 2006.
Depreciation, repairs and maintenance and electricity are not to be included in this account.
(ii) Prepare an Income and Expenditure Account for the year ended 30 April 2006.
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Demystifying Accounting…
(c)
State three reasons why, for most clubs, a Receipts and Payments Account is not always a
satisfactory record of the club’s activities.
The treasurer of Sands Social Club did not keep proper accounting records. The following information
was available at 30 April 2006:
1
At 1 May 2005 subscriptions paid in advance amounted to $210 and subscriptions in arrears
were $150.
2
Receipts during the year ended 30 April 2006:
$
(i)
Subscriptions – for year ended 30 April 2005
150 (in arrears)
– for year ended 30 April 2006
1 400
– for year ended 30 April 2007
(ii)
3
75 (in advance)
Sale of refreshments $4620
Payments during the year ended 30 April 2006:
$
(i)
Purchase of refreshments
3 250
(ii)
Rent
1 200
(iii)
Insurance
(iv)
Any other expenses are to be treated as sundry expenses.
240
Additional information:
1 May 2005
30 April 2006
$
$
Stock of refreshments
270
330
Balance at bank
790
840
All receipts and payments were made through the bank account.
Required
(a)
Prepare the Subscriptions account for the year ended 30 April 2006. (5)
(b)
Calculate the profit made on the sale of refreshments. (2)
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Demystifying Accounting…
(c)
Prepare the Receipts and Payments Account for the year ended 30 April 2006. (7)
(d)
Explain why the figure for subscriptions in the Receipts and Payments Account might be
different from the subscriptions figure in the Income and Expenditure Account. (4)
Mercury Sports Club had the following balances at 1 August 2003.
$
Fixtures and fittings
2200
Stock of refreshments
340
Rent owing
400
Subscriptions in advance
75
The following is a summary of receipts and payments for the year ended 31 July 2004.
Receipts and Payments Account for the year ended 31 July 2004
$
$
Balance at 1 August 2003
490
Rent
2900
Subscriptions
3010
Purchases of refreshments
1400
Sales of refreshments
2000
Sundry expenses
950
Balance c/d
250
5500
5500
On 31 July 2004
1. The club held stock of refreshments costing $480.
2. Subscriptions in arrears amounted to $100.
3. The fixtures and fittings were valued at $2000.
Required
(a)
Calculate the accumulated fund of the Mercury Sports Club at 1 August 2003 (5)
(b)
Calculate the profit made on the sale of refreshments. (5)
(c)
Calculate the subscriptions for the year ended 31 July 2004. (3)
(d)
Identify two differences between a Receipts and Payments Account and an Income and
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Demystifying Accounting…
Expenditure Account. (6)
The assets and liabilities of the Safat Judo Club on 1 February 2005 were as follows
$
Bank
3 150 debit
Motor Vehicle at valuation
2 000
Subscriptions owed by members
250
Rent owing
50
The treasurer provided the following information for the year ended 31 January 2006.
$
$
Receipts during the year
Payments during the year
Subscriptions
10 650
Purchase of new motor vehicle 10 000
Proceeds of sale of motor vehicle
1 750
Competition prizes
210
800
General expenses
2 645
Travelling expenses
830
Competition entrance fees
Rent
2 600
The following information is also available
-The motor vehicle is used to take members to tournaments and competitions. The motor vehicle
owned on 1 February 2005 was sold in March 2005. No depreciation is provided in the year of sale..
A new motor vehicle was purchased on the same day. On 31 January 2006 the new motor vehicle was
valued at $ 8 500.
-On 31 January 2006
Subscriptions paid in advance by members amounted to $ 400
Rent prepaid amounted to $ 100.
Required
a.
Prepare the Income and Expenditure of Safat Judo Club for the year ended 31 January 2006. (10)
b.
Prepare the Balance Sheet of the Safat Judo Club at 31 January 2006. (8)
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Demystifying Accounting…
c.
A member of the club is worried that the surplus or deficit in the Income and Expenditure
account does not agree with the bank balance shown in the Balance Sheet at 31 January 2006.
State and explain two reasons for this difference. (4)
The following assets and liabilities appeared in the books of Amandla Sports Club on 1 January 2003.
Assets
$
Liabilities
$
Office equipment
45 000
Subscriptions
1 400
Lawn mower
6 000
Rent owing
1 600
Subscriptions owing
300
Insurance prepaid
900
Stock of refreshments
800
Given below is a summary of the cash book for the club for the year ended 31 December 2003
Receipts
$
Payments
$
Balance, 1 January 2003
3 000
Lawn mowers
15 000
Subscriptions
28 000
Insurance
2 500
Match ticket sales
15 900
Rent
10 800
Sale of old lawn mower
7 500
Match expenses
9 900
Sale of refreshments
8 200
Electricity
4 200
Refreshments
5 600
Balance c/d
62 600
62 600
The following additional information was also available
a.
Depreciation at 20% per annum is to be charged on lawn mower in existence at the end of the
year.
b.
Equipment is to be depreciated by $2 500 on 31 December 2003
c.
Subscriptions in arrears at 31 December 2003 amounted to $500 and those paid in advance
amounted to $200.
d.
Stock of refreshments on 31 December 2003 was valued at $600.
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Demystifying Accounting…
You are required to
i.
Calculate the accumulated fund at 1 January 2003.
ii.
Prepare the Refreshments Trading account for the year ended 31 December 2003.
iii.
Prepare the Income and Expenditure for the year ended 31 December 2003.
iv.
Prepare the balance sheet as at 31 December 2003.
(ZIMSEC, JUNE 2004)
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