CHAPTER 4
FINANCIAL ACCOUNTING FOR SERVICE FUNDS
Leaflet 401 - Accounting Processes and Procedures for Non-Public Funds
40101 – 40103
40104 – 40107
-
Introduction
Accounting practices
-
Introduction
Personal ledger
Impersonal ledger
Revenue lines
Leaflet 402 - The Ledgers
40201 – 40203
40204 – 40205
40206 – 40207
40208 – 40230
Leaflet 403 - Procedures for Credit Purchases
40301
40302 – 40303
40304 – 40306
40307 – 40315
40316
40317 – 40324
Annex A
Annex B
Annex C
Annex D
-
Introduction
Placing orders
Receipt of goods
Invoices
Traders' statements
Purchases book
Purchases Control Stamp
Dummy Statement
Example Purchases Book
Example Purchases Book (Modified Form)
Leaflet 404 - Accruals and Prepayments
40401 – 40402
40403 – 40405
40406 – 40407
Annex A
-
Introduction
Accruals
Prepayments
Ledger Action taken on Accruals and Prepayments- NOT
RELEASED
Leaflet 405 - The Procedures for Cash and Bank Transactions
40501 – 40502
40503 – 40508
40509 – 40514
40515 – 40516
40517 – 40518
40519 – 40520
40521
40522 – 40525
40526
Annex A
Annex B
Annex C
Annex D
Annex E
Annex F
Annex G
Annex H
-
Introduction
Cash-book
Cash takings books and paying-in slip
Subsidiary activities
Floats
Imprests
Postage book
Vouchers
Cash pay-in programme
Example of a Non-Analytical Cash-Book
Example of an Analytical Cash-Book
Example Cash Takings Book
Example Paying-In Slip
Example Withdrawal Voucher
Example Petty Cash Book
Example Subscription Register – Subsidiary Activities
Example Postage Book
Leaflet 406 - Income Tax (PAYE) and National Insurance (NI) – NOT RELEASED
Leaflet 407 - The Accounting Procedures for Mess Bills
40701
-
Introduction
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40702
40703
40704
40705
40706
40707
40708
Annex A
-
Annex B
Annex C
-
Recording of supplies made on credit
Daily Charges Book (DCB)
Mess bills
Subscriptions and Charges Book (SCB)
Daily schedule of mess bills paid
Mess bills unpaid at the end of the month
Mess bill control account
Recording Subscriptions and Regular Charges – NOT
RELEASED
Daily Schedule of Mess Bills Paid
Mess Bill Control Account (MBCA)
Leaflet 408 - Accounting for Mess Functions
40801 – 40803
40804 – 40809
Annex A
Annex B
-
Introduction
Accounting procedures
Example Officers’ Mess Function Costing – Full Subsidies
Example Officers’ Mess Function Costing – Fixed Value
Discount
Leaflet 409 - Application of VAT
40901
40902 – 40904
40905 – 40908
40909
40910 – 40911
40912
Annex A
Annex B
-
Introduction
Type of tax
Partial exemption
Collection
Calculating and applying VAT
Tax classification
Illustration of the Stages in the Collection of VAT
Charges for Facilities Provided in Service Messes
Leaflet 410 - Value Added Tax – Accounting
41001
41002
41003
41004
41005
41006
41007
41008
41009
41010
41011
Annex A
-
Annex B
-
Introduction
The basic rules
Books of prime entry
Impersonal ledger
Outside organisations
Sale of non-public property
Staff entertainment expenses
Benevolent funds
Annual balance sheet
Stock certificates
Return of VAT - Form 100
VAT Accounting Using an Analysed Cash-Book – NOT
RELEASED
Accounting for VAT in Function Accounts
Leaflet 411 - Preparation of Monthly Statements of Accounts
41101 – 41102
41103 – 41104
41105 – 41108
41109
41110
41111
-
Annex A
Annex B
Annex C
-
Introduction
Closing the ledger account
Trial balance
Income and expenditure accounts
Statement of account
Information for OICs of subsidiary activities and banked
funds
Example of a Trial Balance
Example of a Monthly Statement of Account
Example of Simplified Statement of Account for Issue to
Subsidiary Activities
Leaflet 412 - Preparation of Annual Accounts
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41201 – 41202
41203
41204 – 41207
41208
41209
41210 – 41211
Annex A
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Main Contents Page
-
Introduction
Closing the ledger accounts
Balance sheet
Supporting information
Audit
Certification
Example of Statement of Accounts – NOT RELEASED
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AP3223
Leaflet 401
ACCOUNTING PROCESSES AND PROCEDURES FOR SERVICE FUNDS
Introduction
40101.
This chapter describes the day to day use and operation of the books of account of
the three principal Service Funds found at stations: the officers' mess, SNCOs' mess and Service
Institute Fund. The principles governing the processes and procedures described should be
applied throughout the RAF in the maintenance of Service Funds accounts even where those
accounts have been computerised.
40102.
The leaflets are intended primarily to instruct book-keepers in the processes and
procedures to be used. OICs of funds and activities, whose particular duties and responsibilities
are described in Chapter 2, should also acquaint themselves with the contents of this chapter.
40103.
The instructions are couched in general terms so that they may be applied to
Service Funds accounting at all levels and in all normal circumstances. Should the instructions not
provide for particular eventualities the circumstances are to reported to HQ AIR Service Funds,
who may, if it is considered such action is warranted, authorise the introduction and use of
processes not defined in this chapter.
Accounting practices
40104.
Double entry book-keeping. With the exception of the SFAS, which uses the
Sage financial accounting package to maintain accounts, all Service Funds accounts in the RAF
should be maintained using the double entry method of book-keeping which requires every credit
entry to have a corresponding debit entry. The method's main advantage is that it allows a trial
balance to be extracted and agreed and thus provides an automatic check on the arithmetical
accuracy of the accounts. However, an agreed trial balance is not necessarily a correct, as there
may be errors which can only be traced by a detailed check of ledger entries or by an audit and it is
important, therefore, that extreme care is taken when writing up accounting records and in
interpreting trial balances.
40105.
Use of inks. Where manual accounting records are maintained, all book-keeping
entries should be made, in ink, in clear legible handwriting using only permanent red, blue or black
colours. Green ink is reserved for use by auditors and should never be used for entries in books of
account.
40106.
Errors. If an error is made in an accounting document no attempt should be made
to erase, obliterate or overwrite it. The incorrect entry should be struck through with a single line
and the correct entry written in the nearest available space on the same line or, if necessary, on
the next line. The deletion should be initialled by the person making the correct entry. The use of
ink eradicators or other such preparations should be forbidden.
40107.
Negotiable documents. When cheques or other negotiable documents are being
prepared for signature 'erasable' ball-point or felt-tip should not to be used.
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Leaflet 402
THE LEDGERS
Introduction
40201.
The ledgers are books containing accounts relating to capital, assets, liabilities and
revenue (ie regular annual income and expenditure), and provide fund management with the
following information for budgeting and planning purposes:
a.
How much is owed to a fund or account and by whom (assets).
b.
How much is owed by a fund or account and to whom (liabilities).
c.
Value of possessions (assets).
d.
The worth of a fund account (capital).
e.
The income and expenditure on trading and other regular annual activities
(revenue).
40202.
a.
For convenience two ledgers are used:
The personal ledger containing all accounts relating to creditors.
b.
The impersonal ledger containing all accounts relating to capital, assets, income
and expenditure and liabilities other than the personal ledger creditors.
This leaflet describes in detail the principal accounts that are contained in the ledgers and explains
the types of entry which may be found in each of them.
40203.
Since the ledgers form part of the double-entry book-keeping system every debit
entry requires a corresponding credit entry within the accounting system and vice versa. Within
the ledgers debit entries are made on the left-hand side and credit entries on the right-hand side of
any account.
Personal ledger
40204.
An account is opened in the personal ledger for each trader who provides a fund or
account with goods or services on credit. The personal account is credited with the cost of the
purchase of goods or service as shown in the purchases book (see Leaflet 403). The account is
debited with all amounts paid to the trader as shown in the cash-book.
40205.
Alternative system. When a modified purchases book is used and the personal
ledger is dispensed with, the amounts due to each creditor will be shown in column c of the
purchases book (see Annex D of Leaflet 403). Payment details are recorded in columns d to f and
any unpaid account should be entered in column g and carried forward to column a in the following
month. A trade creditors' control account should be opened in the impersonal ledger to which the
total of column b is to be credited and the total of payments to trade creditors is debited. At the
end of each month and at the end of the accounting period the balance on the trade creditors'
control account must agree with the total of column g in the purchases book.
Impersonal ledger
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40206.
Capital. The capital of the officers' and SNCOs' messes. and the SIF, should be
credited with:
a.
Any initial grant from the RAF Central Fund.
b.
year.
Any surplus on the income and expenditure account at the end of the accounting
c.
Surpluses/profits arising from the increase in value of investments (whether realised
or not).
d.
Surpluses/profits from the proceeds from the sale of property.
e.
Material items of income relating to previous periods and for which no provision has
been made.
Note: Capital transactions to account for annual Contingent Liability increases and property
matters (eg depreciation) take the form of journal entries.
The account is to be debited with:
a.
year.
Any deficiency on the income and expenditure account at the end of the accounting
b.
Losses arising from the decrease in value of investments (whether realised or not).
c.
Losses arising from the proceeds from the sale of property.
d.
Material items of expenditure relating to previous periods and for which no
provisions has been made.
40207.
Assets and liabilities. Accounts are maintained for all assets and liabilities; for
creditors they are either in the personal ledger or the purchases book. The main asset and liability
accounts in this category are:
a.
Property. Any tangible (ie depreciating) property purchased after 1 Oct 05 for in
excess of £500; and all capital (ie non-depreciating) property valued in excess of £500;
should be included within their respective property accounts. Such items are regarded as
capital purchases and are debited to the property asset account, and credited to cash/bank.
Depreciation, where applicable, is an internal journal entry within the capital account. Leaflet
209 refers.
b.
Investments. A separate account is opened for each investment purchased, and
debited with the cost of the investment. The nominal value of the investment and the rate of
interest, if fixed, should be noted on the top of the ledger page. When the investment is sold,
the proceeds are credited to the investment account. Any difference between the book value
and the sale price is posted from the investment account to the capital account as a
surplus/profit on sale of investments. Investment income is dealt with separately at para
40214.
c.
Debtors. An account is opened in the ledger for each debtor (other than for
individual member's mess bills, subscriptions, etc). All amounts owed are debited to this
account and credited to the appropriate departmental account(s). Amounts owed by mess
bill debtors are itemised in the ‘summary of charges’ or ‘subscriptions and charges’ book,
and summarised in the mess bill control account.
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d.
Cash and bank. The cash-book is, technically, a ledger account since it reflects
the cashier's and the bank's indebtedness to the fund. Detailed instructions on the
maintenance of the cash-book are given in Leaflet 405.
e.
Floats, imprests, etc. An account should be opened to record the issue of each
float, imprest, etc (excluding the postage imprest please see para 40521). The amount
booked out in the cash-book should be posted to the debit side of the account. When the
float or imprest is returned, the amount is to be credited in the cash-book and posted to the
debit side of the account in the ledger. Detailed instructions on the use of floats and imprests
are given in Leaflet 405.
f. Subsidiary activity control accounts. These accounts are used to record transactions
relating to specific activities sponsored by a fund, for example a function account or
Christmas Draw prizes account. Balances on such accounts may be carried forward from
month to month but not from year to year. These accounts must be credited with:
(i)
Income received from ticket sales (for function attendance or draw tickets)
(ii)
Subsidies (SEE NOTE BELOW)
They must be debited with:
(i)
The full financial cost to the mess of the function or draw tickets.
Note that in the case of Christmas Draw tickets/prizes, the total income and expenditure
must balance to zero at the end of the FY, and the sum of credits and debits should then be
individually journalled to Christmas Draw income and expenditure accounts respectively.
Alternatively a control account need not be used, and original entries could be entered
directly against the Christmas Draw income and expenditure accounts.
Similarly, note that individual function accounts should also balance to zero, unless a subsidy
has been approved. Subsidies are not expenditure items – they represent agreed discounts
for members and therefore they are actually authorised shortfalls of income. The sum of
credits and debits should be individually journalled to function income and expenditure
accounts respectively at the end of the FY. Any excess of expenditure should equal the
value of agreed subsidies.
During the year, it may be thought helpful to keep track of subsidies granted by debiting their
value into a false ‘expenditure’ line, allowing the function control account to balance via the
corresponding credit ‘income’ entry. This action, if employed, must be undone at the end of
the FY. Where subsidies are granted, functions will not balance!
Cross reference to function accounts
g.
Loans. A separate account should be opened for each loan received (eg from the
RAF Central Fund) or made. After the posting of any transactions affecting a loan account,
any debit balance remaining indicates an asset (a loan due to the fund) and any credit
balance a liability (a loan for repayment by the fund).
Revenue lines
40208.
Revenue lines are used to record transactions relating to day to day income and
expenditure, with the resultant balance on each account usually being transferred to the income
and expenditure account at the end of the accounting period. All items of income are posted from
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the debit side of the cash-book to the credit side of the revenue account and expenses are posted
vice versa. The netting-off of income and expenditure is not permitted, therefore income and
expenditure are recorded in ‘lines’ rather than ‘accounts’. Where the fund is registered for VAT,
postings to accounts which are within the scope of the tax are made net of output tax and
deductible input tax, and the amount of tax is posted to a separate VAT account. The main
revenue lines are explained in paras 40209 to 40221.
40209. Bar income. The bar income line reflects the gross income from bar sales. It may also
reflect the gross income from cellar sales when the same gross profit percentage (GPP) is planned
for both bar and cellar. Where different GPPs are planned a separate cellar income line is to be
maintained. On the same principle, it may be necessary to separate bar ‘wets’ (drinks) from ‘dries’
(sundries) income if different GPPs are used. The bar income line is to be credited with:
a.
The total of cash sales as shown in the cash-book.
b.
The total of credit sales as shown in the summary of charges book (messes only).
c.
The value (at selling price) of all goods supplied for functions.
d.
Accrual for cash takings in respect of sales up to and including the last day of month
which are not paid in until following month.
Examples of bar trading, bar expenses and container accounts are at Annex A of Leaflet 219.
40210. Bar cost of goods sold (CoGS). The bar CoGS reflects the gross expenditure on the
purchase of stock for resale. It may also reflect the gross expenditure on cellar items for home
consumption when the same gross profit percentage is planned for both bar and cellar. Where
different percentages are planned a separate cellar CoGS line is to be maintained. On the same
principle, it may be necessary to separate bar ‘wets’ (drinks) from ‘dries’ (sundries) CoGS if
different GPPs are used for the sale of cigarettes, sweets, toiletries, etc. The bar CoGS line is to
be debited with:
a.
The value at cost price of all bar and cellar stocks brought forward from the previous
month.
b.
The total value of goods bought for resale as shown in the 'bar trading' columns of
the purchases and cash-books.
The account is to be credited with:
a.
The total value (at cost price) of goods returned to the supplier and other
allowances as shown in the purchases book.
b.
The value at cost price of all bar and cellar stocks belonging to the fund or account
as at the end of the month.
40211. Bar expenses. The bar expenses account reflects those costs which are set against the
bar gross surplus (ie bar income less bar CoGS) to determine the bar net surplus. It is to be
debited with:
a.
Gross wages and gratuities paid (including tax and NI?) which are chargeable to
this account.
b.
The total value of goods which are not bought for direct resale (eg gas, fruit, etc).
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c.
The cost of replacements for any breakages of crockery and glass used in the bar.
d.
The cost of maintenance of bar equipment (eg ice machine, cash register).
e.
The cost for use or damage to a brewery’s reuseable containers.
40212.
Bar surplus.
The bar surplus account is to be credited/debited with all
surpluses/deficiencies in bar takings.
40213.
Maintenance. The maintenance line reflects all expenses incurred in the normal
upkeep and conduct of a mess, or exceptionally another fund. The maintenance account is to be
debited with :
a.
The totals of cash and credit purchases relating to the general upkeep of the mess.
b.
Postages, where these cannot be allocated to any other account.
c.
The cost of losses or breakages of equipment appropriate to this account.
d.
Miscellaneous charges and losses not appropriate to any other account.
The account is to be credited with:
a.
The total value of goods returned .
40214.
Investment income. The investment income account reflects receipts of interest and
dividends arising from investments. Surpluses/profits or losses arising from the sale of
investments are not to be entered in this account but are to be posted from the investment account
directly to the capital account as capital profits or losses. The account is to be credited with:
a.
All receipts in respect of interest on fixed accounts, etc, and dividends received in
respect of equity shareholdings.
b.
Receipts in respect of repayments of income tax deducted at source from
investment income.
c.
The assessed amount of interest due at the end of the month on fixed interest
securities and deposits.
d.
The value of dividends declared in respect of equity shareholdings but not paid at
the end of the month.
The account is to be debited with:
a.
The assessed amount of interest due and brought forward from the previous month.
b.
The value of dividends unpaid and brought forward from the previous month.
40215.
Garage income. The garages account reflects income relating to the operation of
garages let to members. It is to be credited with:
a.
All receipts in respect of rentals received.
b.
The amount of rental outstanding at the end of the month.
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The account is to be debited with:
c.
The amount of rental outstanding brought forward from the previous month.
40216. Garage expenditure. The garages account reflects expenditure relating to the operation of
garages let to members. It is to be dedited with:
a.
Payments in respect of rates, water rates, electricity and water charges relating to
the garages.
b.
Charges in respect of repAirs to the garages.
40217.
Contractor rebate. The contractor rebate line reflects any periodic receipts of
rebate from the contractor, where applicable. (See Leaflet 706 for details.) It is to be credited with:
a.
The gross amount of rebate received from the contractor, before deduction of hire
and other charges set against the rebate.
b.
The amount of rebate due at the end of the period but not paid (this is to be
estimated if necessary by the reference to previous months' figures).
The account is to be debited with:
a.
The amount of unpaid rebate brought forward from the previous period.
40218.
Coin-operated machines income (other than gaming machines). Various coinoperated machines are operated by non-public funds; a separate income line is to be opened for
each type of machine and is to be credited with:
a.
The total amount of cash collected from the machine or received from the contractor
(where he operates the machine).
40219.
Coin-operated machines expenditure (other than gaming machines).
separate expenditure line is to be opened for each type of machine and is to be debited with:
a.
Charges for the hire and/or operation of the machine.
b.
Any repAir charges which are borne by the fund.
A
c.
Insurance premiums relating to the operation of the machine, if not an integral part
of the fund's overall policy.
40220.
Gaming machines. The gaming machine account reflects all transactions relating
to the operation of the gaming machine; a separate income line is to be opened for each type of
machine and is to be credited with the total of cash collected from the machine, before making any
deduction for expenses but, where the fund is registered for VAT, after deduction of the VAT
element.
40221.
Coin-operated machines expenditure (other than gaming machines).
separate expenditure line is to be opened for each type of machine and is to be debited with:
a.
Charges for the hire and/or operation of the machine.
b.
Any repAir charges which are borne by the fund.
A
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c.
Insurance premiums relating to the operation of the machine, if not an integral part
of the fund's overall policy.
d.
Any other expenses incidental to the operation of the machine.
40222.
Entertainments. The entertainments expenditure line reflects the cost of both
formal and informal entertainment. The account is to be debited with:
a.
Amounts granted from the account towards the cost of functions.
b.
Charges relating to ancillary entertainments (eg TV hire, billiard table expenses,
etc).
40223.
Mess or club improvements. The mess or club improvements line includes all inyear revenue expenditure for items which improve the amenities of the mess or club. It is to be
debited with:
a.
Any expenditure on the improvement of the amenities of the mess or club.
40224.
Mess guests (messes only). The mess guests account reflects the cost of
providing hospitality to official guests of the mess and the income raised to meet such expenditure.
The account is to be debited with:
a.
The cost of hospitality to official guests of the mess, as approved by the PMC, CMC
or authorised officers.
40225.
Banked funds. Any RAF Service Fund for which the stn cdr has responsibility as a
trustee, but which is not sponsored or controlled by the officers' or SNCOs’ mess or by the Service
Institute Fund, is termed a banked fund. Banked funds are not accounted for in SFAS to the same
extent as the messes and SIF; there are no separate capital, asset and liability accounts, or
income and expenditure lines. Instead a banked fund is simply to be credited with:
a.
Amounts deposited by the activity.
It is to be debited with:
b.
Amounts withdrawn by the activity.
c.
Payments made on behalf of and with the specific authority of the lodged activity.
The balance on the account is to be carried forward at the end of each accounting period. Should
the activity cease or the fund providing the banking facility close, the balance of cash held is to be
returned in toto to the activity or disposed of in accordance with its instructions.
40226. Station sports account. The Station sports account, where used, reflects all transactions
connected with sporting activities which are conducted on a station basis. Separate accounts for
individual sports are not required but may be maintained if warranted by the circumstances. The
account is to be credited with:
a.
Amounts received from the public purse in respect of grants for the maintenance of
sports equipment.
b.
All amounts received from messes as sports subscriptions.
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c.
Amounts received from the sale of sports equipment or recovered in respect of lost
or damaged sports equipment.
d.
The total value of goods returned or other credits as shown in the purchases book.
e.
Grants made by the Service Institute to augment the income to the account.
f.
The value of stock of sports goods for resale on hand at the end of the month.
The account is to be debited with:
a.
The value of stock brought forward from the previous month.
b.
The total value of goods purchased, for cash or on credit, appropriate to this
account.
c.
All expenses (including wages and gratuities) relating to sporting activities.
d.
Amounts allocated to individual sports, where the commanding officer has directed
separate accounts, which are to be maintained.
40227. Corporals' and junior ranks' clubs. Corporals' and junior ranks' clubs may operate
banked funds within SFAS. Such funds should be credited with:
a.
Any initial or subsequent grant from the Service Institute fund.
b.
Any allocation of contractor rebate or gaming machine profit authorised by the
Service Institute committee.
c.
Amounts collected in respect of admission charges for club functions.
d.
Members’ subscriptions (corporals' club only).
The accounts should be debited with:
e.
All expenditure incurred by the club which is authorised by the club committee.
40228. Sports clubs. Individual sports may be authorised to operate a separate banked fund
within SFAS, subject to the commanding officer's approval. Such an account is to be credited with:
a.
Any share of the overall sports budget allocated a separate account within the
Service Institute, subject to the commanding officer's approval. Such an account is to be
credited with:
b.
Any grant made directly by the Service Institute committee.
c.
Contributions made by individual members.
The account is to be debited with:
d.
All expenditure in relation to that particular sport.
40229. Recreational clubs. Recreational clubs such as the wordwork club and model Aircraft club
may open banked funds in SFAS with the approval of the commanding officer. Each such fund is
to be credited with:
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a.
Any initial or other grant made by the Service Institute.
b.
Subscriptions, donations and other contributions from members.
The fund is to be debited with:
a.
All bona fide expenditure relating to the activities of the club.
40230. Accounts of non-service funds and activities. When private organisations, such as a
nursery school, scout troop, RAOB lodge, etc, are permitted to operate on an RAF station they
may be allowed to use the SFAS as a bank in the same way as a banked fund (see para 40231).
However, they will not be eligible for automatic excepted charitable status, and the written
permission of the stn cdr will be required.
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AP3223
Leaflet 403
PROCEDURE FOR CREDIT PURCHASES
Introduction
40301.
Many purchases made by Service Funds are obtained on credit terms with payment
normally being made after the end of the month in which the transactions take place. In view of the
timescale involved between ordering, receiving and eventually paying for the goods or services, a
system of control is required which will monitor the amount of credit being pledged and ensure that
goods to be paid for have been received and recorded in the accounting and other records. This
leaflet explains the procedures that should be followed when making credit purchases from the
placing of the order through to payment of the supplier, and describes the accounting books and
records to be used.
Placing orders
40302.
Delegation of authority. In order to control purchases effectively the number of
officials authorised to place orders should be kept to the minimum. In some cases it is possible for
the OIC fund or activity to deal with all ordering but, where this is not practicable, he may delegate
the placing of orders to authorised officials should be maintained and the terms of the delegation,
including any specific restrictions on ordering, should be included in the TOR for each individual.
40303.
Use of the order-book. Orders for credit purchases should be made in writing,
using the duplicate order-book specified in Leaflet 217, and signed by the authorised official.
Orders placed verbally are subsequently to be confirmed in writing on an official order-form with
the top copy of the order-form being forwarded to the trader and the duplicate retained in the orderbook as a permanent auditable record. The order-book should be held at all time by the official to
whom it was issued.
Receipt of goods
40304.
Authorised officials. The number of persons who may receive goods on behalf of
a fund or activity should always be kept to a minimum and ordinarily should be restricted to the
person who placed the order (see para 40302). Where this is not practicable, the OIC may
delegate the receipt of goods to authorised officials. A list of these officials should be maintained
by the OIC and specific instructions concerning the receipt of goods should be included in their
TOR.
40305.
Delivery note. When goods are received they will normally be accompanied by a
delivery note. The quantities received should be checked against this note by the authorised
officials(s) responsible for receiving goods. This check should, wherever possible, be performed at
the time of delivery and any discrepancies in the delivery should be notified to the carrier, the
supplier and the OIC of the fund or activity. Discrepancy details should be noted on the delivery
note and the delivery note number entered on the duplicate copy of the order-form. Details of the
goods received should be entered in the stock or property book and the delivery note is then to be
passed to the fund clerk in SFAS (ie mess clerk, SIF clerk etc) who will hold it pending the arrival of
the invoice.
40306.
Substitute delivery note. If goods are received without a delivery note the
authorised official receiving them should raise a substitute delivery note and, in the presence of a
witness, use it to record the details of the goods received. Notification of discrepancies and
subsequent recording action is then to be taken as detailed in para 40305.
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Invoices
40307.
Receipt of invoices. Invoices from traders may be received either by the fund
clerk or by the department or activity concerned; in the latter event they should be passed
immediately to the fund clerk for processing. Once an invoice has been received by the fund clerk
it should be linked to the delivery note (or substitute delivery note) and franked with the purchases
control stamp as shown in Annex A.
40308.
Dummy statement. A dummy statement as shown in Annex B should be prepared
by the fund clerk for each trader for whom more than one invoice is expected in the month and also
where a single invoice applies to more than one departmental account. The invoice details should
be entered on the dummy statement, analysed into columns, including deductible input tax and
then passed to the OIC so that it may be checked. The dummy statement is retained by the fund
clerk.
40309.
Checking the invoice against delivery note. The invoice should be be compared
by the OIC with the delivery note and any discrepancies referred to the supplier. Where
discrepancies occur, details should be annotated on the invoice, which is then returned to the fund
clerk with instructions as to payment while the discrepancy is being resolved with the supplier. The
fund clerk should annotate the invoice entry on the dummy statement accordingly and file the
invoice and delivery note pending clearance. When the discrepancy is cleared the fund clerk can
re-issue the invoice to the OIC for completion of the checking procedure.
40310.
Order-book. The duplicate copy of the order-form should be cross-referred to the
invoice, the order-form serial number being inserted in the appropriate box on the purchases
control stamp, which is then initialled by the OIC.
40311.
Check that goods received/services completed. The OIC should confirm, by
reference to the delivery note or other available evidence, that all goods invoiced have actually
been received or that all services have been completed. The appropriate box on the control stamp
is then initialled.
40312.
Check of prices. The OIC should verify the invoice prices by reference to any
contract, trader's price list or quotation/estimate. Where the purchase price of goods bought for
resale has changed, the possible need to adjust selling prices should be considered.
40313.
Check of arithmetical accuracy. The OIC should check the arithmetical accuracy
of the invoice, bring any errors to the notice of the trader, and notify the fund clerk of any
corrections necessary to the dummy statement and of any credit note etc outstanding. The
appropriate box on the control stamp is then initialled.
40314.
Check against stock/property book. The OIC should insert details of the invoice
against the stock or property book entry, insert the stock or property book folio number and initial
the appropriate box on the control stamp.
40315.
Payment authorisation. When the OIC of the fund or activity is satisfied that all
necessary actions have been completed he will enter details of the expenditure line(s) to be
debited in the appropriate box on the control stamp, sign (not initial) authorising payment and
return the invoice to the fund clerk.
Traders' statements
40316.
Check against dummy statement and invoices. At the end of each month, the
dummy statement should be totalled, cross-cast and compared with the trader's statement to
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ensure that all invoices and listed therein and that the amounts shown are correct. Any differences
which cannot be reconciled should be referred to the trader by the OIC fund or activity.
Purchases book
40317.
A purchases book in the form shown in Annex 403C is normally maintained to record
credit purchases; alternatively, where the personal ledger is dispensed with (see Leaflet 402), a
purchases book in the form shown in Annex D should be maintained. Totals from dummy
statements and single invoices are entered into the purchases book and analysed into the
departmental columns. The purchases book folio is entered on the dummy statements/invoices.
40318.
Agreement of purchases book. At the end of each month, after all entries in the
purchases book are completed, the total and analysis columns are totalled, cross-cast and agreed.
40319.
Postings to the impersonal ledger. Departmental analysis column totals are
posted to the debit side of the respective expenditure lines in the impersonal ledger.
40320.
Postings to the personal ledger. Where a personal ledger is maintained, an
account should be opened for each trader and the line total in the purchases book for each trader
should be posted to the credit side of the trader's account. Where no personal ledger is kept, the
amount due to each individual trader is shown in the appropriate column in the modified purchases
book; the total of the purchases for the month is posted to the credit side of a Trade Creditor's
Control Account in the impersonal ledger.
40321.
Preparation of cheques. After completion of all purchase book action, cheques
should be prepared for the balances shown in the personal ledger or modified purchases book in
respect of each trader. The prepared cheques should be passed to the SFAS bank account holder
(OIC SFAS) together with the relevant invoices and statements. Remittance slips should also be
prepared showing details of the payment made.
40322.
Action by OIC SFAS. All vouchers are checked by OIC SFAS who, when satisfied
that all action is complete and that the amounts due to the traders have been correctly calculated,
should sign the cheques, stamp all vouchers with the 'Paid' stamp and return the vouchers to the
fund clerk. Wherever possible, cheques and similar negotiable documents after signature should,
once signed, be dispatched without delay personally by the fund holder.
40323.
Filing of vouchers. When all action is complete, all statements, invoices and
delivery notes should be filed away in purchase book entry order and retained for six years.
40324.
Returns. When goods are returned, a credit note will be supplied by the trader.
This should be treated in a similar manner to an invoice, except that it should be entered on the
dummy statement in red and deducted from the total of invoices received. Where the net result of
transactions with a trader is a credit to the fund, the purchase book entry should be made in read
and carried forward until such time as it is cleared either by further purchases or by cash refund.
Annexes:
A.
B.
C.
D.
Purchases control stamp.
Dummy statement.
Example purchases book.
Example purchases book (modified form).
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403-3
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403-4
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AP3223
Leaflet 403
Annex A
PURCHASES CONTROL STAMP
1.
Funds and activities should use a control stamp on all invoices for goods and services. The
stamp must be obtained locally. Extra items may be included to suit local circumstances but the
items shown on the example illustrated would invariably be included.
Fund
Order-book number & initial
Goods/services received
Prices correct
Stock/property book folio & initial
Account(s) to be charged
Authorised for payment
Purchases book folio & initial
Title:
No:
Initial:
Initial:
No:
Title:
Signature:
No:
Initial:
Initial:
Initial:
2.
The correct use of this stamp is of the utmost importance and each item should be
separately initialled.
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403A-1
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AP3223
Leaflet 403
Annex B
DUMMY STATEMENT
TRADER: NAAFI 1236
MONTH: Jan 10
FUND: Officers' Mess
PB FOLIO: 17
Date
Invoice
No
Total
Bar trading
Bar expenses
6 Jan 10
C127801
22.63
18.15
0.71
10 Jan 10
C127813
17.68
10.15
14 Jan 10
C127819
30.16
22.75
20 Jan 10
B347818
7.58
22 Jan 10
C127824
96.47
78.32
26 Jan 10
C127829
16.30
13.58
27 Jan 10
B347824
12.17
31 Jan 10
C127833
60.36
49.10
1.20
Jan 10
Total
263.35
192.05
3.14
Mess
improvements
0.98
Maintenance
Etc
Deduct
input tax
(at 20%)
3.77
4.58
2.95
1.40
5.03
7.58
0.25
1.82
16.08
2.72
12.17
10.06
7.80
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19.75
40.60
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403B-1
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AP3223
Leaflet 403
Annex C
EXAMPLE PURCHASES BOOK
Date
Name of trader
PL
folio
Total
Bar
trading
Bar
expenses
5 Jan 10
Watneys
4
234.30
177.25
11 Jan 10
Smith & Sons
3
46.97
39.14
19 Jan 10
NAAFI
2
263.34
192.05
19 Jan 10
Accountant officer
8
204.45
19 Jan 10
Towelmaster Ltd
7
18.45
18.45
31 Jan 10
Davies and Co
5
7.87
7.87
31 Jan 10
Tobaccosales Ltd
6
105.02
87.52
880.40
495.96
2.50
Containers
Maintenance
Messing
Deductable
input tax
(at 20%)
15.50
39.05
7.83
3.14
7.80
19.75
40.60
204.45
IL/5
17.50
5.64
IL/6
CREDIT PERSONAL
LEDGERS
23.30
IL/12
46.07
IL/11
204.45
104.98
IL/8
IL/7
DEBIT IMPERSONAL LEDGERS
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403C-1
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AP3223
Leaflet 403
Annex D
EXAMPLE PURCHASES BOOK (MODIFIED FORM)
January 2010
B/F
From
Prev
Month
Name of Trader
(a)
17.04
Trade
For
Month
Bar
Trading
Bar
Expenses
Containers
Maintenance
Messing
Deductible
Input tax
(at 20%)
Total
Outstanding
Date
Paid
Chq
No.
Amount
Paid
C/F to
Next
Month
(c)
(d)
(e)
(f)
(g)
39.05
234.30
12 Feb
123456
234.30
7.83
64.01
12 Feb
123457
64.01
40.60
263.34
12 Feb
123458
263.34
204.45
12 Feb
123459
204.45
12 Feb
123460
18.45
(b)
Watneys
234.30
177.25
Smith & Sons
46.97
39.14
NAAFI
263.34
192.05
Accountant
Officer
204.45
Towelmaster Ltd
18.45
18.45
18.45
Davies & Co
7.87
7.87
7.87
Tobaccosales
Ltd
105.02
87.52
880.40
495.96
5.64
23.30
46.07
IL/3
IL/5
IL/6
IL/12
IL/11
17.04
CREDIT TRADE
CREDITORS CONTROL
ACCOUNT
2.50
3.14
15.50
7.80
19.75
204.45
17.50
105.02
204.45
104.98
897.44
IL/8
IL/17
7.87
12 Feb
123461
105.02
889.57
7.87
DEBIT IMPERSONAL LEDGERS
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NOTE: Purchases book entries are taken from the dummy statements. Compare Annex 403B with entry above for NAAFI.
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403D-2
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AP3223
Leaflet 404
ACCRUALS AND PREPAYMENTS
Introduction
40401. In order that the true state of the surplus/deficit of a department can be shown month by
month, all income and expenditure appropriate to the month must be accounted for. Items often
appear in the accounts of a period other than that to which they relate and the purpose of this
leaflet should describe the adjustments necessary in respect of such items.
40402.
Accrued income (also called provisioned income) and prepayments are assets while
accrued expenses are liabilities, and they should be shown as such in all monthly annual accounts.
Some examples of the accounting action required are given in Annex A.
Accruals
40403.
Accrued income. When income is expected and it is reasonably certain that it will
eventually be received (eg interest on fixed interest investments), a ‘provision’ asset account for
that future income should be created, and debited with the known (or estimated) income due,
whilst crediting the appropriate income line. (See Annex A, Example 1.) The provision should be
reversed by journal entry against the income line when the actual income is received. The actual
income will then be credited to the income line, and debited to the cash/bank asset account.
40404. Outstanding monthly bills expenses. When goods have been received but the invoice
is outstanding at the end of the month, an ‘accrued expenditure’ liability account should be created
and credited with the total or estimated cost, whilst debiting the appropriate expenditure line. (See
Annex A, Example 2.) The reserve should be reversed by journal entry against the expenditure
line when the actual invoice for the charge is received. The invoice will be debited to the
expenditure line, and credited to trade creditors (unless immediately paid by cash/bank). Similar
action should be taken for expenses due in the month, eg gratuities, which are not paid till a later
period.
40405.
Periodic charges in arrears. Certain items (eg Independent Examination fees) are
invoiced for periods in arrears. The charge in the expenditure lines for these items should be
spread evenly over the period involved. To achieve this, a ‘reserved expenditure’ liability account
should be created and credited with an appropriate proportion of the total or estimated cost at the
end of the first month, whilst debiting the appropriate expenditure line. In each successive month
this reserve is increased by further proportions of the total cost so that by the end of the period the
whole cost will have been accrued. (See
Annex A, Example 3.) The accrued expenditure
should be reversed by journal entry against the expenditure line when the actual invoice for the
charge is received. The invoice will be debited to the expenditure line, and credited to trade
creditors (unless immediately paid by cash/bank).
Prepayments
40406.
Payments in advance. Occasionally, goods or services are invoiced and paid for in
advance (eg 'cash with order' terms). Where this has occurred the amount has been debited to the
appropriate expenditure line but the goods or services have not been received in the same
accounting period and an adjustment has, therefore, to be made. The amount paid in advance
should be entered on the credit side of the expenditure line and debited to a ‘prepayments’ asset
account. (See Annex A, Example 5.) This can be reversed once the goods or services have been
received.
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40407.
Periodic charges paid in advance. Certain items (eg insurance premiums and TV
rentals) are invoiced for periods in advance and the full cost will be debited immediately to the
appropriate expenditure line. In order to spread the expense evenly over the period concerned, a
reserve should be created immediately by crediting the total cost to the expenditure line (effectively
returning its balance to zero) and debiting a ‘prepayment’ asset account. At the end of the first
month an appropriate proportion of the prepayment can be credited back out of the prepayment
asset account and debited to the expenditure line. In succeeding months, the reserved
expenditure should be continually decreased appropriately until it becomes exhausted. (See Annex
A, Example 5.)
Annex:
A.
Ledger action taken on accruals and prepayments.
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404-3
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Leaflet 404 Annex A Not Released
404A-1
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404A-2
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AP3223
Leaflet 405
THE PROCEDURES FOR CASH AND BANK TRANSACTIONS
Introduction
40501.
The wide variety of cash transactions undertaken by Service Funds, activities and
accounts all conform to certain basic principles of accounting, a sound knowledge of which will
assist OICs officials connected with funds and subsidiary activities in the performance of their
duties. The purpose of this leaflet, therefore, is to describe the books of account commonly
associated with cash transactions and to explain the procedures to be followed when using them.
40502.
Every cash transaction should be supported by either a voucher or a receipt which
provides sufficient evidence of the transaction for audit purposes. The type of document will vary
according to the nature of the transaction but the following information is invariably to be included:
a.
Date of transaction.
b.
Name of person from whom received/to whom paid.
c.
Amount in words and figures.
d.
Account to be credited/debited.
e.
Signature of authorising official.
f.
Signature of recipient (for cash payments) or cheque number.
g.
Voucher/receipt number.
Cash-book
40503.
The cash-book used to record cash transactions and the exact format may vary
according to the needs of the user. The book may be non-analytical; there may be separate books
or separate sections for receipts and payments or for cash and bank transactions. Examples of
non-analytical and analytical cash-books are given at Annexes A and B.
40504.
Cash receipts.
cheques are received.
The following procedure should be used whenever cash or
a.
A receipt should be issued for all cash received (it is not strictly necessary, however,
to issue a receipt where a cheque is tendered, although no request for a receipt should be
refused because it confirms date of payment). For convenience, certain receipts issued to a
mess manager/treasurer will be provided either in the cash takings book (see Annex C) or in
the format of Annex D. In other cases, a receipt should be issued from a printed, prenumbered book of duplicate receipts.
b.
All cash received (including cheques) should be entered on the receipts (debit) side
of the cash-book, in the 'cash' column.
c.
The amount received should be posted to the credit side of the appropriate income
line in the ledger, unless an analytical cash-book is used (see sub-para e).
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d.
The supporting receipt is, where possible, to be numbered and filed and should be
made available for audit purposes. The receipt may be:
(1)
The duplicate receipt retained in the book.
(2)
The entry in the cash takings book, which must be cross-referred to the
cash-book.
(3)
The proforma paying-in slip (see Annex D).
(4)
The daily schedule of paid mess bills (see Leaflet 407).
(5)
Any remittance slip or other similar document accompanying monies
received.
e.
When an analytical cash-book is used the columns should be totalled and crosscast at the end of each month. Where the fund, activity or account is registered for VAT,
output tax should be deducted from the items by applying the appropriate VAT fraction (see
Leaflet 409). The VAT deducted should be extended across into a column headed 'VAT' and
brought down on to the same line as the column totals (see Annex B). The columns should
be cross-cast and agreed again and the column totals posted to the credit side of the
respective income lines in the ledger.
40505.
Bank receipts. This term is used to denote monies paid directly into the bank
account by outside agencies, eg investment income or settlement of an account by giro credit.
Fund holders will normally be advised of such receipts on their bank statements. The amount
received should be entered in the 'bank' column on the receipts side of the cash-book and should
be posted to the credit side of the appropriate income line in the ledger. Where an analytical cashbook is used, the entry in the 'bank' column should be copied to the appropriate analysis column
and action is then taken as shown in sub-para 40504e.
40506.
Payments. Before making a payment, the cashier or treasurer should scrutinise the
voucher to ensure that the payment has been properly authorised and is within the authorising
official's delegated powers. The voucher should only be signed by an official whose name is on the
list of those authorised to sign. Fund officials should not self authorise payments ie the recipient
and approving authority should be separate individuals. The following procedure should be used:
a.
Payment should be made and a receipt obtained on the voucher.
b.
The amount paid should be entered on the payments (credit) side of the cash-book
and brief details of the transactions should be entered in the 'details' column. If the payment
includes deductible input tax it should be treated as follows:
(1)
Non-analytical cash-book. The amount exclusive of VAT and the related
VAT should be shown as an inset entry in the cash-book (see Annex A), the total being
shown in the cash column.
(2)
Analytical cash-book. The total amount should be entered in the cash
column, the VAT exclusive amount in the departmental column and the VAT element in
the 'VAT' column (see Annex B).
c.
The amount paid should be posted to the debit side of the appropriate expenditure
line in the ledger, unless an analytical cash-book is used, (see sub-para e below).
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d.
The supporting voucher should be numbered and filed to await audit. The payment
voucher may be either:
(1)
A withdrawal voucher, similar to the example at Annex E.
(2)
An entry in the wages and gratuities book or on a wages and gratuities
acquittance roll, where this system is used (see Leaflet 221).
(3)
A supplier's invoice or bill.
(4)
Any other suitable document which meets the requirements of para 40502.
e.
When an analytical cash-book is used, the various columns should be totalled,
cross-cast and agreed at the end of the month. The column totals are then to be posted to
the debit side of the respective expenditure lines.
40507.
Bank payments. A bank payment is one which is made by cheque, standing order
or direct debit, etc, and it is recorded in the cash-book using the procedures given in para 40506
but with the following exceptions:
a.
Cheques electronic payments and standing orders, etc, are only to be signed by
OIC SFAS and must be accompanied by the relevant voucher(s) when presented for
signature. The cheque number should be written on the payment voucher in lieu of a receipt.
b.
Payments should be recorded in the 'bank' column of the cash-book and the last
three digits of the cheque number should be entered in the column provided.
Standing orders and direct debits will be automatically charged to the account by the bank and will
appear on the bank statement. The fund holder should ensure that the details are also entered in
the 'bank' column on the payments side of the cash-book and should place the code 'SO' or 'DD' ,
as appropriate, in the cheque number column. Bank charges are also treated as bank payments
and the details should be entered in the cash-book as soon as they are notified by the bank usually on the bank statement.
40508.
Contra entries. When cash is withdrawn from or paid into the bank, cash and bank
balances need to be adjusted to reflect the transfer. The respective cash-book entries are known
as 'contra' entries and should be denoted by the symbol 'C' in the folio column of the cash-book.
Contra entries are not posted into the ledger; where an analytical cash-book is used, the amount of
each contra entry must be entered in the 'contra' columns, and the total of the debit and credit
contra columns balanced at the end of each month. Contra entries are made as follows:
a.
Withdrawal of cash from bank. An entry for the amount withdrawn should be
made in the 'bank' column on the payments side and in the 'cash' column on the receipts side
of the cash-book. The last three digits of the cheque number must accompany the entry in
the normal way.
b.
Payment of cash into bank. An entry for the amount banked should be made in
the 'cash' column on the payments side and the 'bank' columns of the receipts side of the
cash-book.
The encashment of private cheques also involves the use of contra entries, but in this case, both
credit and debit entries will be in the 'cash' columns (see Leaflet 212).
Cash takings books and paying-in slip
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40509.
Cash takings book. A cash takings book, in the format at Annex C, may be
maintained by any non-public fund, activity or account when a variety of takings arise and a nonanalytical cash-book is used. The mess manager/treasurer should enter the amounts received
from each source in the respective columns and cross-case these to the 'total' column. The book,
together with the total cash collected and supporting vouchers, should be produced at the times
specified in local orders to the cashier or OIC who should enter the total amount collected in words,
in his own handwriting, and should sign the book as having received the cash.
40510.
At the end of the month the columns should be totalled, cross-cast and agreed.
Where the fund, activity or account is registered for VAT output, tax should be deducted from the
taxable receipts by applying the appropriate VAT fraction (see Leaflet 409). The VAT deducted
should be entered in a column headed 'VAT' and brought down on to the same line as the column
totals (see Annex C). The columns should be cross-cast and agreed again and the column totals
posted to the credit side of the respective income lines in the ledger.
40511.
Paying-in slips. When an analytical cash-book is used there is no requirement to
maintain a cash takings book and all monies collected should instead be listed on a paying-in slip
(see example at Annex D). Paying-in slips, together with the cash and supporting vouchers should
be presented at the times specified in local orders to the cashier or OIC who should complete the
lower half of the slip showing the total amount received in figures and words, sign it, detach and
return it to the official making the payment as a receipt. The payment should be recorded as a
single entry in the 'cash' receipts column of the cash-book and analysed in the normal way.
40512.
In order to exclude minor cash transactions from the main cash-book, a petty cashbook in the format of Annex F may be maintained. A responsible official should be appointed to
account for the petty cash and should follow the procedure set out below:
a.
Receipts. The only cash received for petty cash purposes should come from the
cashier or OIC and the sum received should be entered in the receipts column of the petty
cash-book; the entry should be cross-referred to the corresponding entry in the payments
column of the main cash-book, which should be signed by the official.
b.
Payments. A brief description of all payments made should be entered in the
'details' column while the amount of any deductible input tax should be entered in the 'VAT'
column and the VAT-exclusive amount in the appropriate expenditure line.
c.
End of the month. At the end of each month, the payments columns should be
totalled and the cross-cast agreed with the total columns. The totals of the analysis columns
should be posted to the respective expenditure lines. The cash in hand should be entered
on the next available line in the 'total' column of the payments side before the receipts and
total payments columns are finally totalled and balanced: the actual cash held and the book
balance must, of course, agree. The cash in hand figure forms the first receipt entry at the
beginning of the next month by being entered on the next available line in the receipts
column (see Annex F).
40513.
Vouchers. All payments and receipts recorded in the petty cash-book should be
supported by the appropriate vouchers which should be serial numbered and, at the end of each
month, filed to await audit.
40514.
Petty cash holdings. The balance held in petty cash at any time should be
regarded as part of the whole of the cash held by the cashier or OIC for the purpose of comparing
actual cash holdings against the limitations placed on cash holdings by the stn cdr (see Leaflet
102). A limit may be placed on holdings of petty cash but this must be stated as being part of the
overall limit on cash holdings imposed on the cashier or OIC.
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Subsidiary activities
40515.
Cash-book. An OIC of a subsidiary activity or a banked fund should maintain a
subsidiary cash-book in the standard non-analytical format shown in Annex A. The 'bank' column
should be retitled with the name of the parent fund (eg SIF) and should show the amounts paid into
or withdrawn from the fund; the 'cash' column should be used to record cash transactions
undertaken by the OIC. Normal rules relating to the maintenance of the book, vouchers, etc,
should be observed (see para 40502 to 40508).
40516. Subscriptions register. Whenever subscriptions are levied against those participating
in subsidiary activities or banked fund activities, a subscriptions register should be maintained in
the format of Annex G. The secretary/treasurer should enter the details of all members in the
register together with amounts due for subscriptions etc (including amounts brought forward from
the previous period). Income received should be shown in the appropriate columns and any
amounts under or overpaid transferred to the 'carried forward' column. At the end of the month the
book should be totalled and any extension columns cross-cast and agreed with the total columns.
The OIC should verify that the total of subscriptions and charges entered in the register as having
been received agrees with the amount shown in the subsidiary cash-book, and should sign the
certificate at the foot of the register.
Floats
40517. A permanent float may be issued where a continuing need exists for a supply of change
for any trading activity (eg bar, shop, etc) and a separate account should be opened in the ledger
to record it. Cash issued as a float should be entered on the payments side of the cash-book and
the entry posted to the debit side of the 'floats' asset account in the ledger. The issue of the float is
also to be recorded in the back of the cash-book and a signature obtained from the recipient.
Where a float is no longer required, and also at the end of the accounting period, it should be
returned and the cash received entered on the receipts side of the cash-book. The amount is then
to be posted to the credit side of the 'floats' account to clear the original issue and the entry in the
back of the cash-book is also to be cancelled. Floats should be included in the monthly statement
of account under the heading of cash in hand. Float holders should submit a certificate that they
still hold the float.
40518. At the end of the accounting year, all floats should be surrendered and the cash brought
on charge in the cash-book. Floats may be re-issued at the commencement of business in the
new accounting year.
Imprests
40519. When wishing to make purchases without knowing their exact cost, a cash imprest may
be issued for the purpose; imprests may also be issued for other purposes such as to provide
funds for expeditions etc to meet legitimate expenses. In each case the procedure set out below
should be followed (see also Leaflet 214 for purchases from discount stores):
a.
A voucher should be raised and authorised by a responsible official for the
estimated cost of the purchases (or for the amount of the expedition etc imprest).
b.
Cash should be issued to the imprest holder against his or her signature on the
voucher.
c.
The amount should be entered in the payments side of the cash-book and posted to
the debit side of an 'imprest' asset account in the ledger. (Any balance remaining on this
account acts as a reminder than an imprest is outstanding and that hastening action should
be taken to clear the account as soon as possible.)
405-5
AL3
40520. After the purchases have been made or the expedition etc completed, the imprest holder
should produce a receipted account to the cashier or fund holder, who should take the action
detailed below and illustrated in Annex A:
a.
Raise a voucher for the actual amount of the purchases or for the total spent by the
expedition etc imprest holder and, after attaching it to the receipted accounts, have the
voucher authorised by a responsible official.
b.
Pay or receive the difference between the imprest in the receipts column of the
cash-book and post this entry to the credit side of the 'imprest' account, thus clearing the
ledger account.
c.
Enter the actual cost of the purchases in the payments column of the cash-book and
post this entry to the debit side of the appropriate expenditure line.
Postage book
40521. A postage book in the format of Annex H should be maintained to record the purchase
and use of postage stamps. The following procedure should be used:
a.
When stamps are purchased, their cash value should be entered in the receipts side
of the postage book and cross-referred to the entry on the payments side of the petty cashbook. These entries are contra entries and so no ledger posting is required.
b.
When stamps are used, an entry should be made in the 'payments' column of the
postages book. It is not necessary to record each individual stamp used and a single entry
for each batch of mail will suffice.
c.
At the end of each month the 'payments' column of the postages book should be
totalled and the total expenditure posted to the debit side of the maintenance, general
expenses or other appropriate expenditure line. The balance of stamps on hand should be
entered on the next available line on the payments side and then both sides should be
totalled and agreed. The balance of stamps remaining forms the first receipts entry at the
beginning of the new month by being entered on the next available line on the receipts side
of the book (see Annex H). The value of the stamps remaining on hand should be treated as
a cash balance and should be shown on all statements of account and balance sheets.
Vouchers
40522.
Retention. All vouchers supporting cash transactions should be retained for a
period of six years from the date of audit, Leaflet 109 refers.
40523.
Filing. At the end of each month the vouchers relating to that month's transactions
should be placed in a file in order of serial number and retained for presentation to the SFIAB.
40524.
Custody. Vouchers for the period under audit should be kept in a secure cabinet
when not in use. Those relating to previous periods may be bound together as a complete
package for each period and stored in archives for eventual destruction. It is recommended that
each package is marked with the date on which it is due for review and destruction.
40525.
Destruction. Guidance on the procedure for the review and destruction of
accounting
records is given in Leaflet 109.
405-6
AL3
Cash pay-in programme
40526. The cash pay-in programme is used to plan and monitor the frequency with which unit
Service Fund accounts and activities pay in cash to the SFAS cashier; the programme should be
devised by the OIC SFAS in consultation with the managers of individual accounts and activities
and should be maintained by the cashier, who should be responsible for preparing and monitoring
it each month. All regular payments should be recorded on the cash pay-in programme as they
occur and the cashier should check the programme daily, normally towards the close of business.
They should ascertain from account holders the reasons for any late payments and should advise
OIC SFAS when explanations are unsatisfactory. Where accounts make payments irregularly the
cashier should consult the account holders whenever four weeks elapse without any payment
having been received.
Annexes:
A.
B.
C.
D.
E.
F.
G.
H.
Example of a non-analytical cash-book.
Example of an analytical cash book.
Example cash takings book.
Example paying-in slip.
Example withdrawal voucher.
Example petty cash book.
Example subscription register – subsidiary activities.
Example postage book.
405-7
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Page
405-8
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AP3223
Leaflet 405
Annex A
EXAMPLE OF A NON-ANALYTICAL CASH-BOOK
RECEIPTS (Left-hand page)
Date
Jan 23
25
28
Details
Voucher
Folio
Balances
B/F
Takings (1)
Takings (2)
Imprest Returned (2B)
Cash to Bank
CTB/7
CTB/7
14R
IL/12
C/
Takings
Investment Income
Takings
Cash to Bank
CTB/7
IL/29
CTB/7
15R
C/
30
31
Feb 1
Balances
B/D
Bank
Cash
2,704 60
1,714 95
499 90
371 74
75 00
750 00
272 34
32 50
356 29
500 00
3,987 10
3,290 22
1,533 97
748 18
PAYMENTS (Right-hand Side)
Date
Jan 23
25
28
31
Details
Chq Voucher Folio
Bank
No
Totals
B/F 2,178 58
17P
IL/12
Issue of Imprest (2A)
Gratuities- Supper Dance
18P
IL/37
Cash ‘n’ Carry Ltd (2C) 64.89
19P
IL/8
9.73
19P
IL/7
Cash to Bank
20P
C/
Tax & National Insurance
889
IL/49 274
55
Mr Gardner – Wages & NI
21P
IL/10
Cash to Bank
C/
Balances
CD 1,533 97
3,987 10
Cash
1,088 12
75 00
21 50
74 62
750 00
32
500
748
3,290
80
00
18
22
Notes:
1. Takings have been fully analysed in the cash takings book (see Annex C) and posted from
there to the departmental ledger accounts.
2. (A-C) These entries illustrate the procedure for recording the issue, receipt and clearance
of imprests in the cash-book.
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Page
405A-1
AL3
405A-2
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AP3223
Leaflet 405
Annex B
EXAMPLE OF AN ANALYTICAL CASH BOOK
RECEIPTS (Left hand side)
Date
Details
Vouc
23 Jan
25 Jan
28 Jan
Balances
Takings
Takings
Imprest returned
Cash to bank
Takings
Investment Income
Takings
Cash to bank
B/F
28R
29R
30R
C
31R
32R
33R
C
Bank
Cash
£
30 Jan
31 Jan
Totals
Less VAT
Bar
£
2,704
750
60
£
£
1,714
499
371
75
95
90
74
00
1,039
244
268
272
34
143
18
8
41
120
75
50
500
00
356
29
134
99
4
85
145
55
3,987
10
10
3,290
3,290
22
22
1,830
274
1,555
IL/8
1 Feb
Balances
C/D
1,533
47
39
09
24
6
3
68
71
45
Gaming
machine
£
387
30
162
40
100
20
Telephone
Mess bills
£
£
72
37
48
40
395
Misc
VAT
Contras
£
£
£
62
49
00
75
00
32
50
00
32
3,987
Messing
97
748
12
51
61
48
7
40
10
21
89
IL/14
18
916
137
778
IL/18
20
43
77
29
139
139
IL/23
74
62
62
41
436
436
IL/6
2,500
00
750
00
500
00
3,750
00
3,750
00
16
78
78
156
156
IL/41
49
IL/29
75
IL/12
32
50
50
00
419
419
50
50
IL/17
00
50
2,282
15
405B-1
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PAYMENTS (Right hand side)
Date
Details
Chq
no
23 Jan
25 Jan
Balances
Issue of imprest
Gratuities – supper dance
Cash.n Carry Ltd
Cash to bank
Tax and NI
Mr Gardner – wages / NI
Cash to bank
Balances
Vouc
Bank
Cash
£
28 Jan
31 Jan
Totals
889
B/F
17P
18P
19P
C
20P
21P
C
C/D
2,178
274
58
£
1,088
75
21
74
750
Bar
Messing
£
12
00
50
62
00
Maint
£
129
74
Grats
£
78
91
£
187
24
329
Misc
HMRC
VAT
£
£
£
63
75
21
64
1,533
97
3,290
22
194
63
32
78
IL/8
18
9
73
91
220
IL/14
04
69
IL/10
2,500
00
750
00
500
2,282
00
15
6,032
15
50
89
274
80
00
18
£
41
00
55
32
500
748
Contras
55
80
00
351
IL/37
13
75
IL/12
00
274
IL/49
55
50
91
IL/17
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405B-2
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AP3223
Leaflet 405
Annex C
EXAMPLE CASH TAKINGS BOOK
Date
Bar
£
Messing
Gaming
Machine
Telephone
p
£
p
£
£
387
Total b/f
720
09
10
76
21 Jan
203
75
4
23
p
30
22 Jan
115
63
9
69
25 Jan
244
39
6
71
162
40
28 Jan
268
09
3
45
100
30 Jan
143
18
8
41
31 Jan
134
99
4
Total
Less
VAT
1,830
12
274
51
Mess
Bills
Misc
Public
Grant
VAT
Daily
Total
Sum paid to
Cashier/Treasurer/OIC
in figures and words
Signature
of cashier
and date
p
55
28
17
20
37
40
318
42
1491
85
44
40
252
38
32
80
175
32
427
70
499
90
499
90
20
371
74
371
74
120
75
272
34
272
43
85
145
55
29
74
41
16
356
29
356
29
48
10
916
20
139
62
436
78
3,419
82
7
21
137
43
49
49
00
00
419
Four hundred & twenty
Seven pounds &
seventy pence
Four hundred & ninety
nine pounds and ninety
pence
Three hundred&
seventy one pounds &
seventy four pence
Two hundred & seventy
two pounds & thirty four
pence
Three hundred & fifty six
pounds & twenty nine
pence
J Jones
22 Jan
J Jones
25 Jan
J Jones
28 Jan
J Jones
30 Jan
J Jones
31 Jan
15
405C-1
AL3
1,555
IL/8
61
40
89
IL/14
778
IL/8
77
139
IL/23
62
436
78
IL/6
49
00
IL/41
419
15
3,419
82
3,419
82
IL/17
405C-2
AL3
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405C-3
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AP3223
Leaflet 405
Annex D
EXAMPLE PAYING-IN SLIP
Complete in duplicate:
One copy to be retained by SFAS/Cashier,
One copy to be returned to payee for onward transmission to
OIC
Name of fund:
SNCOs’ Mess
Date:
25 Jan 10
Details
Fund
code
Voucher No:
Amount
£
28R
Denomination
p
Amount
£
p
(if known)
Bar
Messing
Gaming Machine
Telephones
Public a/c -----Grant
244
6
162
37
49
39
71
40
40
00
Total
499 90
Cheques
£20
£10
£5
£2
£1
50p
20p
10p
5p
2p
1p
65
20
20
220
4
130
7
3
20
3
5
25
00
00
00
00
00
50
80
10
25
78
22
499 90
To be completed by cashier:
To: OIC SNCOs’ Mess
SFAS received the sum of: £499.90
(Sum in words: Four hundred and ninety nine pounds and ninety pence)
From: Cpl Montague
In respect of: daily takings
SFAS Stamp
Signature: J
Date: 25 Jan 10
Jones
Name: J Jones
Appt:
Cashier
405D-1
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405D-2
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AP3223
Leaflet 405
Annex E
EXAMPLE WITHDRAWAL VOUCHER
Complete in duplicate:
One copy to be retained by SFAS/Cashier,
One copy to be forwarded to OIC by SFAS
Name of fund:
Date:
Voucher no:
Fund code:
To be completed by OIC or delegated authority:
The sum of
£
:
(Sum in words:__________________________________________________________)
is authorised for payment to________________________________________________
in respect of _____________________________________________________________
and is to be charged to the ______________________________ account.
Signature _______________________________
SFAS Stamp
Name __________________________________
Fund appointment ________________________
Date __________________________________
To be completed by recipient of payment:
Received the sum of £
:
(Sum in words: __________________________________________________________)
Signature ___________________________________
Date __________
Name
_____________________________________
405E-1
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405E-2
AL3
AP3223
Leaflet 405
Annex F
EXAMPLE PETTY CASH BOOK
Date
Receipts
£
Jan 1
7
9
10
16
21
25
27
30
Details
10
15
Total
£
p
5
Payments
Cross
Refer
62
00
Balance
Lemons
Playing cards
Postage Stamps
Flowers
From OIC mess
Postage stamps
Serviettes
Decorations
B/F
1
2
PB3
3
CB/4
PB3
4
5
62
Balance
C/D
p
1
Maint
£
2
1
28
80
00
15
2
2
1
p
Bar
£
p
1
12
Ent
£
p
VAT@
15%
£ p
15
00
16
72
2
16
11
11
3
4
51
15
62
31
IL/2
1
12
IL/5
1
50
22
2
20
48
IL/9
IL/28
31
15
62
4
51
Balance
B/D
£ p
16
10
70
1
Misc
2
00
2
00
4
00
C
/
Debit ledger accounts
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405F-1
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405F-2
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AP3223
Leaflet 405
Annex G
EXAMPLE SUBSCRIPTION REGISTER – SUBSIDIARY ACTIVITIES
Title of Activity:
Motor Club
Month and Year: January 2010
Name
Location
B/F From Previous Period
Overpaid
Sgt Adams
FS Jones
SAC Kennedy
Flt Lt Logan
SAC Matthews
SAC Poole
SAC Thompson
Sqn Ldr Barnes
WO Johns
FS Young
Comcen
SHQ
Supply
SHQ
Catering
GD Flt
MT
Supply
B Sqn
Catering
Misc Rally Fees
Misc
Total
Due
Amount
Paid
Rec No
Date
Underpaid
1.00
1.00
1.00
Subscription
1.00
C/F to Following Period
Overpaid
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
10.00
0.50
0.50
1.00
1.00
2.00
1.00
1.00
1.00
1.00
1.50
1.00
1.50
11.00
1.00
2.00
1.00
1.00
2.00
1.50
1.00
1.50
11.00
773
774
775
776
777
778
779
780
3 Jan 10
5 Jan 10
3 Jan 10
5 Jan 10
5 Jan 10
7 Jan 10
3 Jan 10
10 Jan 10
Underpaid
1.00
1.00
1.00
1.00
Certificate by Officer IC: Certified that the total subscriptions and charges paid during the month of January 2010, as shown above, agrees with the
total of subscriptions and charges brought to account in my cash book for that month.
Signature: D Jones
Rank/name:
JONES
Flt
Lt
D
Activity: OIC Motor Club
Date: 31 Jan 2010
405G-1
AL3
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405G-2
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AP3223
Leaflet 405
Annex H
EXAMPLE POSTAGE BOOK
Date
From
Where
2010
Jan 1 Balance
10 Mess Sec
20 Mess Sec
Feb 1
Balance
Folio
Amount
£
p
B/F
PCB 42
PCB 44
1 20
12 00
2 00
B/D
Date
2010
Jan 3
10
18
21
27
31
15 20
1 80
Details
Mess Bills (6x30p)
Mess Sec Letters (3x30p)
Creditors (18x40p)
NAAFI (30p)
Honorary Members (8x40p)
Expenditure
Balance
Folio
IL/18
C/D
Amount
£
p
1 80
90
7 20
30
3 20
13 40
1 80
15 20
405H-1
AL3
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405H-2
AL3
LEAFLET 406 NOT RELEASED
Annex A and Annex B Not Released
406-1
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406-2
AL3
AP3223
Leaflet 407
THE ACCOUNTING PROCEDURE FOR MESS BILLS
Introduction
40701. Subscriptions and other standing charges are levied against mess members monthly in
arrears and, particularly in officers' messes, certain other items are supplied on credit to members
and the cost recovered on their monthly mess bills. This leaflet describes the general principles on
which procedures for mess bill administration and accounting should be based.
Recording of supplies made on credit
40702. Any goods or services supplied on credit to members should be suitably recorded. The
messing register provides for casual and guests meals while the bar credit sales are recorded in
bar-books or on chits. Other charges should be recorded in a manner suited to local
circumstances.
Daily Charges Book (DCB)
40703. Where a DCB is maintained, amounts are normally to be transferred into the book each
day from the records referred to in para 40702. Where a DCB is not maintained, a method of
recording charges prior to entry on the mess bill should be devised to suit local requirements.
Members should be allowed to inspect their own accounts on request.
Mess bills
40704. Charges should be entered on mess bills on a weekly or monthly basis, according to the
system in use. At the end of the month, standing charges in respect of mess subscriptions etc
should be entered on the bill and the various columns totalled and cross-cast. The total amount
due from members must agree with that shown as due in the Subscriptions and Charges Book
(SCB) (see below).
Subscriptions and Charges Book (SCB)
40705. When all action on the mess bill is complete, the totals of each category of charge should
be transcribed into the SCB (see Annex A), which may be in loose-leaf or book form. The
summary is then to be sub-totalled, cross-cast and agreed and, if the mess is registered for VAT
purposes, output tax should be deducted from those items which are taxable by applying the
appropriate VAT fraction (see Leaflet 409) and new column totals brought down as shown in
Annex A The tax deducted should be entered in a column headed 'VAT' and totalled on the same
line as the other columns. The summary should then be cross-cast and agreed again as shown in
Annex A and the column totals posted to the credit (or debit for refunds) side of the appropriate
income lines. The total of amounts brought forward from the previous month is deducted from the
total outstanding and the resulting figure, which represents the total of charges for the current
month, is posted to the debit side of the mess bill control account (see para 40708), thus
completing the double entry.
Daily schedule of mess bills paid
40706. A schedule listing mess bills paid should be prepared each day and a sample format is
given in Annex B. At the close of business each day the schedule should be totalled and the
amount entered in the receipts side of the cash-book; the schedule should be retained to support
407-1
AL3
the cash-book entry. Individual entries on the schedule should be transcribed, together with
payment details, into the SCB and the schedule initialled to show that this has been done.
Mess bills unpaid at the end of the month
40707. At the end of the month, any amounts still unpaid should be entered in the 'carry forward'
columns of the SCB and in the 'brought forward' column of the next month's books. Amounts
brought forward should be identified on the individual's next month's mess bill.
Mess bill control account
40708.
A mess bill control account should be opened in the impersonal ledger; it should be
debited with the net total of charges in respect of each month (see paras 40705 and 40706) and
credited with amounts received in respect of mess bills. Where a non-analytical cash-book is
used, these amounts should be posted from the cash-book daily; where an analytical cash-book is
used, the total of the 'mess bills' column should be posted at the end of the month. The balance on
the account represents the amount outstanding at the end of the month and it should be reconciled
with SCB, taking care that bills paid in the month to which they relate are dealt with correctly. A
worked example of a mess bill control account is shown at Annex C together with a reconciliation
between the SCB and mess bill control account. The reconciliation statement should be written in,
or firmly affixed to, the appropriate page in the SCB.
Annexes:
A.
B.
C.
Recording subscriptions and regular charges.
Daily schedule of mess bills paid.
Mess Bill Control Account (MBCA).
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407-2
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Leaflet 407 Annex A Not Released
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407A-1
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AP3223
Leaflet 407
Annex B
DAILY SCHEDULE OF MESS BILLS PAID
Date: Feb 10
Rank
1 Feb 10
Name
Amount
Posted to Summary
Sqn Ldr
Morton
25.39
DA
25.39
DA
23.29
19.75
13.58
DA
DA
DA
56.62
DA
27.05
DA
27.05
DA
Total entered in Cash Book
4 Feb 10
Gp Capt
Flt Lt
Plt Off
Grove
Orr
Mason
Total entered in Cash Book
6 Feb 10
Fg Off
Total entered in Cash Book
Flood
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AP3223
Leaflet 407
Annex C
MESS BILL CONTROL ACCOUNT (MBCA)
Date
Item
1 Jan 10
Balance
31 Jan 10
Mess Bills
Folio
£
Date
B/F
90.16
4 Jan 10
SCB 12
134.53
Item
Folio
£
Cash
CB 54
13.85
7 Jan 10
Cash
CB 55
27.94
8 Jan 10
Cash
CB 56
19.74
10 Jan 10
Cash
CB 57
21.59
28 Jan 10
Cash
CB 58
19.72
31 Jan 10
Balance
C/D
121.85
224.69
1 Feb 10
Balance
C/D
224.69
121.85
Reconciliation between summary of charges and Mess Bill Control Account
Date
1/1
Item
MBCA balance b/f from Dec 09 (as per Dec 09 trial balance)
Balance (£)
90.16
31/1
Less Dec 09 mess bill payments received in Jan 10
(83.12)
(CB 54,55,56,57)
31/1
31/1
Plus mess bill charges for Jan 10
= Total amount due at end of Jan 10 (as per SCB)
7.04
134.53
141.57
31/1
31/1
Less Jan 10 mess bills paid in Jan 10 (CB 58)
MBCA balance c/d from Jan 10 (as per Jan 10 trial balance)
(19.72)
121.85
Note: The MBCA balance represents the running total of all mess bills owed to the mess.
407C-1
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407C-2
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AP3223
Leaflet 408
ACCOUNTING FOR MESS FUNCTIONS
Introduction
40801.
A wide variety of official, informal and private functions are held in officers' and
SNCOs' messes and this leaflet details the accounting procedures that should be used for all such
functions. Although the forms and procedures have been designed specifically for mess functions
they should also be used for any large and complex function run by any Service Fund or subsidiary
activity.
40802.
Every function held in a mess should be planned by the sponsor in conjunction with
the mess manager. Planning will include detailed estimates of costs, subsidies and income (from
other funds, etc) together with the calculation of any levy which is to be paid by those attending.
These estimates must then be approved by the mess committee or, in the case of a private
function, by those responsible for the function.
40803.
Any subsidy towards the cost of members’ tickets should be recorded in the
appropriate minute-book. Goods and services provided for a function should always to be listed on
appropriate documents.
Accounting procedures
40804.
Consolidation of costs. A costing sheet, in the format of Annex A should be used
to consolidate the costs of a function. Where the mess is registered for VAT purposes, the total
value of bar issues should be written down to VAT-free prices by applying the appropriate fraction
(see Leaflet 409). The net amount is then inserted in Part 1 against 'Bar'. Other items of
expenditure are treated similarly, taking care that only those items which contain a VAT element
are written down (eg there is no VAT in the amount for gratuities; most messing items are zerorated). A sub-total is then determined.
40805.
Deduction of grants and subsidies. Because VAT is not chargeable on grants
towards the cost of functions from public funds or subsidies from mess funds (see Leaflet 218) the
next step, therefore, is to deduct the amount of any such grants/subsidies, before the addition of
VAT. (See Leaflet 410 for accounting for VAT).
40806.
Addition of VAT and sharing of costs. The remaining cost is normally met by
those persons attending the function and it is this element which is subject to VAT at the standard
rate. A final total is then produced and this amount is recovered from those attending the function
on whatever basis has been agreed. A list of those attending together with the charge levied in
each case, is then compiled made in Part 2 of the function costing sheet (see Annex A).
40807.
Messes which are not registered for VAT. Where the mess is not registered for
VAT, all items of expenditure are to be entered on the function costing sheet at their full (gross)
purchase price. Mess or public contributions are to be deducted from the total gross costs and the
remaining balance recovered from those attending. No writing down of prices is necessary and no
VAT is to be added to the amounts charged to members.
40808.
Calculation of members’ levies. Under Charity Commission guidelines the mess
subsidy should primarily benefit the members, and it is accepted that at guest functions this benefit
may extend to members’ first guests. If the mess membership wish (with first guests) to benefit
exclusively from the whole subsidy then that option is available, and is represented by the example
function costing at Annex A, which leaves additional/honorary guests to pay the full economic costs
408-1
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of the function. However, if the mess membership feel that it is in the best interests of the mess to
partially subsidise other guests too, then the membership may vote instead to operate a fixed
surcharge for additional/honorary guests, as per the example function costing at Annex B.
40809. Recovery of charges. The amounts to be recovered are to be entered on the members'
daily charges sheets/personal accounts/mess bills in the 'functions' column. The list in Part 2 of
the function costing sheet is to be initialled to show that this has been done.
40809.
Function account. An account should be opened for each function. The costs
listed in Part 1 of the function costing sheet are to be entered on the debit side of the function
control account. For gratuities, band and certain other items of expenditure, the corresponding
credit entry will appear in the payments side of the cash-book. No accounting action is required for
mess contributions (previously called ‘grants’) since they effectively represent a loss to the mess.
The amount recovered in levies is to be debited to mess bills in the subscriptions and charges
book and credited to the function account. The sums of the function control account debits and
credits are then journalled to function income and expenditure lines respectively. The difference
between the two figures will represent the subsidies made by the mess.
Annex:
A.
B.
Example officers’ mess function costing – full subsidies.
Example officers’ mess function costing – fixed-value discount.
408-2
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408-3
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AP3223
Leaflet 408
Annex A
EXAMPLE OFFICERS' MESS FUNCTION COSTING - FULL SUBSIDIES
FUNCTION: Christmas Draw
DATE: 9 Dec 10
PART 1
FUNCTION COSTING :
COVERS:
275
FUNCTION COSTS
GROSS
BAR
£
3,375.00
BAR SUNDRIES
£
800.00
GRATUITIES
£
3,375.00
GENERAL COSTS
£
540.00
MESSING
£
3,500.00
ENTERTAINMENTS (DODGEMS)
£
4,071.25
ENTERTAINMENTS (BAND)
£
200.00
£
-
£
15,861.25
TOTAL COSTS
(A) Less Subsidies
AMOUNTS
VAT
£
562.50
£
133.33
£
£
90.00
£
£
678.54
£
33.33
£
£
1,497.71
NET
£
2,812.50
£
666.67
£
3,375.00
£
450.00
£
3,500.00
£
3,392.71
£
166.67
£
£
14,363.54
£
7,000.00
£
7,363.54
£
1,472.71
£
8,836.25
Subsidies
AMOUNT VATABLE
ADD VAT @20%
(B) TOTAL RECOVERIES (INCL VAT)
RECOVERIES
Honorary/Additional Guests
Full Members + 1 Guest
Hon/AddGuests Paying FULL ECONOMIC
COST
100
175
TOTAL
RECOVERIES
Cost/Head
£
57.59
£
17.59
£
5,758.64
£
3,077.61
£
8,836.25
6829B ACTIONED ON
BACCHUS ACTIONED ON
AUTHORISED BY
RANK:
NAME:
408A-1
AL3
SIGNATURE:
DATE:
PART 2
Name
Flt Lt Andrews
Fg Off Bailey
Sqn Ldr Barker
Sqn Ldr Beasley
Flt Lt Blyth
Fg Off Blackstock
Flt Lt Booth
Wg Cdr Brook
Sqn Ldr Brown
Sqn Ldr Collins
Flt Lt Davidson
etc…………
Member +1
1
1
1
1
1
2
2
2
2
2
2
158
Totals
175
Grand total
Requested
Max
275
275
300
Hon/Add
1
2
2
95
100
AUTHORISED
BY
RANK:
NAME:
SIGNATURE:
DATE:
Cost
£17.59
£17.59
£17.59
£17.59
£17.59
£35.17
£35.17
£35.17
£92.76
£150.35
£150.35
£8,249.35
£8,836.25
408A-2
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408A-3
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AP3223
Leaflet 408
Annex B
EXAMPLE OFFICERS' MESS FUNCTION COSTING - FIXED-VALUE DISCOUNT
FUNCTION: Christmas Draw
FUNCTION COSTING :
DATE: 9 Dec 10
COVERS:
275
PART 1
FUNCTION COSTS
AMOUNTS
GROSS
BAR
£
3,375.00
BAR SUNDRIES
£
800.00
GRATUITIES
£
3,375.00
GENERAL COSTS
£
540.00
MESSING
£
3,500.00
ENTERTAINMENTS (DODGEMS)
£
4,071.25
ENTERTAINMENTS (BAND)
£
200.00
£
£
TOTAL COSTS
(A) Less Subsidies
VAT
£
562.50
£
133.33
NET
£
2,812.50
£
666.67
£
£
90.00
-
£
3,375.00
£
450.00
£
£
678.54
£
33.33
-
£
-
£
-
£
-
15,861.25
£
1,497.71
£
14,363.54
Subsidies
£
7,000.00
AMOUNT VATABLE
£
7,363.54
ADD VAT @20%
£
1,472.71
£
8,836.25
£
3,849.55
£
4,986.70
£
8,836.25
(B) TOTAL RECOVERIES (INCL VAT)
3,500.00
£
3,392.71
£
166.67
RECOVERIES
Honorary/Additional Guests
100
Full Members + 1 Guest
175
Hon/AddGuests Paying SURCHARGE of:
£
Cost/Head
£
38.50
£
28.50
10.00
TOTAL RECOVERIES
6829B ACTIONED ON
BACCHUS ACTIONED ON
AUTHORISED BY
RANK:
NAME:
408B-1
AL3
SIGNATURE:
DATE:
PART 2
Name
Member +1
Hon/Add
Cost
Flt Lt Andrews
1
£28.50
Fg Off Bailey
1
£28.50
Sqn Ldr Barker
1
£28.50
Sqn Ldr Beasley
1
£28.50
Flt Lt Blyth
1
£28.50
Fg Off Blackstock
2
£56.99
Flt Lt Booth
2
£56.99
Wg Cdr Brook
2
£56.99
Sqn Ldr Brown
2
1
£95.49
Sqn Ldr Collins
2
2
£133.98
Flt Lt Davidson
2
2
£133.98
etc…………
158
95
£8,159.35
Totals
175
Grand total
275
100
AUTHORISED
BY
Requested
275
RANK:
Max
300
NAME:
£8,836.25
SIGNATURE:
DATE:
408B-2
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408B-3
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AP3223
Leaflet 409
APPLICATION OF VAT
Introduction
40901.
The purpose of Value Added Tax (VAT) and the application of the VAT regulations to
Service Funds and activities, including the requirements for registration, are explained in Leaflet
218. This leaflet provides guidance on the types of VAT, the system of collection and the method
of calculating and applying the tax to goods and services; it also provides a breakdown of the
classifications into which goods and services are grouped for tax purposes. The leaflet is issued
as a guide to OICs and clerical staff of funds and activities which are registered for VAT purposes.
Any references below to funds or activities assume those organisations to be registered. This
leaflet should be read in conjunction with Leaflets 218 and 410 (VAT Accounting).
Type of tax
40902.
Input tax. Funds and activities are charged with VAT by their suppliers on the goods
and services supplied to them; this tax is known as 'input tax' and must be supported by a legal
VAT invoice. Input tax on goods and services which are either obtained for resale or are clearly
identifiable as direct trading (ie ‘business’) expenses, is reclaimable from HMRC and is known as
'deductible input tax'. Input tax on goods or services which are not obtained in the course of
business is not reclaimable and is known as 'non-deductible input tax'. The following are examples
of goods and services which are subject to the different types of input tax:
a.
Deductible input tax.
(1)
Goods purchased for resale. Any goods and services purchased by funds
and activities for resale to members, eg beer, spirits, foodstuffs, tobacco, dance
groups.
(2)
Identifiable business expenses. Goods and services purchased for the
sole purpose of allowing trading to continue, eg laundering of staff uniforms, tablecloths
and purchases of such items as coolers, freezers, optics, cleaning powders, stationery
for use in the bar, messing or other trading departments.
b.
Non-deductible input tax. Any goods or services not obtained in direct support of
a trading activity eg polish, stationery, laundering sheets, purchase of silver, free barrels of
beer (if charged as a bar expense), etc.
40903.
Output tax. When funds or activities supply taxable goods and services to their
customers they must charge VAT; the tax charged being known as 'output tax'.
40904.
Offsets. Deductible input tax can normally be offset against output tax and the
difference paid to (or reclaimed from) HMRC. However, under HMRC advice messes are not
permitted to make net recoveries from HMRC (See T-Letter 511/10 or 507/11).
Partial exemption
40905.
Principle. Service Funds and activities whose output includes goods or services
which are classed as ‘exempt’ from VAT (eg Christmas Draw raffle tickets) are regarded by HMRC
as being partially exempt. This means that they may only deduct or reclaim that element of their
deductible input tax which relates to their taxable outputs. Applying this principle to Christmas
Draws again, for example, indicates that messes should not generally reclaim VAT on Christmas
409-1
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Draw prizes, because they do not apply VAT to the raffle tickets. However, because Service
Funds are typically low-level traders of exempt goods, the beneficial ‘de minimis’ provision often
applies (see para 40906).
40906.
De minimis rule. If in any period funds or activities have exempt outputs which are
small in relation to their total outputs, they may deduct the whole of their (deductible) input tax for
that period, including the exempt element, as if it were fully taxable. This ruling will only apply if the
value of the exempt input tax is less that £625 per month (2011) on average and less than 50 per
cent of the total input tax, whichever is the greater. Funds or activities in this position should obtain
advice from their local VAT office.
40907. Implications of de minimis rule. Assuming that the only exempt inputs to the mess are
Christmas Draw prizes (this assumption is the mess’s responsibility to check) then these exempt
inputs may attract VAT up to £1,875 in a VAT quarter before de minimis rules cease to apply.
Where VAT is £1,875 at a standard rate of 20%, the gross payment is £11,250. Therefore messes
may reclaim VAT on up to £11,250 (gross) worth of Christmas Draw prizes, despite not applying
VAT to the raffle tickets.
40908.
Calculations of deductible input tax. The following formula is issued by HMRC
for calculation of deductible input tax in cases of partial exemption (ie where exempt inputs exceed
the de minimis limits). The formula is to be used by all partially exempt funds and activities. This
method calculates the value (excluding VAT) of taxable outputs as a percentage of the value
(excluding VAT) of the total outputs. The percentage is then applied to the total input tax to
provide the amount of deductible input tax eg:
Value of outputs chargeable at the standard rate (excluding VAT)
Value of outputs chargeable at the zero-rate
Value of taxable outputs
Value of exempt outputs
Value of total outputs (excluding VAT)
Percentage of taxable outputs = 20,000 / 25,000 x 100 = 80%
Total input tax*
= £1,200
Deductible input tax
= 80% of £1,200 =
10,000
10,000
20,000
5,000
25,000
£960
*This figure must not include any input tax which is non-deductible for reasons unconnected with
partial exemption (see para 40902b).
Collection
40909. VAT is collected at each stage of the process of production and distribution of goods and
services. Traders bear the tax on the increased value of the produce between purchase and
resale, the full tax being borne by the consumer at the end of the chain of distribution. An
illustration of how VAT is collected at each stage in the distribution of goods is given at Annex A.
Calculating and applying VAT
40910. When Service Funds and activities are registered for VAT, deductible input tax is to be
deducted when the goods or services are recorded in the books of prime entry. Where goods are
subsequently offered for resale output tax is then applied to the selling price, recovered from the
consumer and credited to the VAT account (see Leaflet 410 for full details). The following
examples illustrate the method used to calculate VAT at each stage:
a.
Input Tax. To calculate the VAT paid on an article (ie the input tax) it is necessary
to apply the fraction rate of tax/(100 + rate of tax) to the sum paid; eg if VAT currently is set
409-2
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at
20%,
This fraction is:
20/120
= 1/6
So, for example:
Sum paid
VAT paid is £2.40 x (1/6)
Cost price of item less VAT
= £2.40
= £0.40
= £2.00
b.
Output tax. Assuming the article at a. is now resold to produce a profit of £1, the
VAT due (ie the output tax) is calculated by applying the rate of tax (currently 20%) to the
selling price, eg:
Selling price before tax
VAT at 20%
Selling price incl VAT
40911.
= £3.00
= £0.60
= £3.60
Rounding Down. VAT is always rounded down to the nearest whole pence.
Tax classification
40912.
follows:
Goods and services, both purchased and sold on, are classified for tax purposes as
C
- Standard rate. Set in Jan 2011 at 20%.
RR
- Reduced rate. Set in Jan 2011 at 5%.
ZR
- Zero-rate. The level of output tax is nil but a higher rate could be levied in the
future – any input tax paid can still be reclaimed.
E
- Exempt from tax. No input tax or output tax is applicable).
OS
- Outside the scope of VAT (eg dividends, grants, interest, etc).
equivalent to a non-business item as far as VAT is concerned.
This is
Full details of the classifications and the ranges of goods and services to which they apply are
given in HMRC Notice No 701. A table of the facilities provided by non-public funds and activities
under the above classifications is given at Annex B.
Annexes:
A.
B.
Illustration of the stages in the collection of VAT.
Charges for facilities provided in Service messes.
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AP3223
Leaflet 409
Annex A
ILLUSTRATION OF THE STAGES IN THE COLLECTION OF VAT
Stage
Buying
price
Deductible
input tax
at 20%
Total
paid by
purchaser
Transaction
Selling
price
Output
tax
at 20%
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Total
paid
to
seller
(h)
VAT
paid
to
HMCR
(i)
1
-
-
-
2
2.50
0.50
3.00
3
3.50
0.70
4.20
4
-
-
6.00
VAT
Totals
1.20
Producer
makes goods,
sells them to
wholesaler for
£2.50 plus
output tax and
pays the output
tax to HMRC
Wholesaler
pays producer
£3.00, sells
goods to retailer
for £3.50 plus
output tax and
pays to HMRC
difference
between the
input and output
tax
Retailer pays
wholesaler
£4.20, sells
goods to a
customer for
£5.00 plus
output tax and
pays to HMRC
difference
between input
and output tax
Retailer sells
goods to
customer for
£6.00.
Customer is
final user and
cannot reclaim
any tax
Summary of
input/output tax
2.50
0.50
3.00
0.50
3.50
0.70
4.20
0.20
5.00
1.00
6.00
0.30
(Note)
-
-
-
2.20
-
1.00
Note: Final tax is paid by the retailer, but tax has been collected at each stage of production
409A-1
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and distribution of the goods.
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AP3223
Leaflet 409
Annex B
CHARGES FOR FACILITIES PROVIDED IN SERVICE MESSES
Charges met by
Extra
messing
(Note 1)
Casual
meals
(Note 1)
Bar sales
(Note 1)
Subscriptions
Misc
(Note 2)
1. Single servicemen
living-in
Recipient
C
-
C
OS
OS
2. Married
unaccompanied
servicemen living-in
Recipient
C
-
C
OS
OS
3. Married accompanied
and single servicemen
living-out
Recipient
C
C
C
OS
OS
4. Civilians (non-industrial)
other than 6 and 7 below
Recipient
C
C
C
C
OS
5. Civilians (industrial)
other than 6 and 7 below
Recipient
C
C
C
C
OS
Recipient of facilities
6. Civilians from Govt
Depts attending Service
training courses
a. Recipient, or
when
reclaimable…
Remarks
If MOD is meeting
charges they will be
exempt as for b.
b. Sponsoring
authority
7. Contractors employees
attending training courses
8. Foreign and
Recipient or
Contractor
C
C
a. Sponsoring
C
OS
If MOD meets the
409B-1
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Commonwealth personnel
(other than 9 below)
authority (Note 3)
ZR
ZR
-
OS
-
charges the costs
subsequently raised
by MOD against
sponsor will be zerorated as for 8a, 9a
and 10a
E
E
-
OS
-
See 8
ZR
ZR
-
ZR
-
See 8
C
C
C
C
C
b. Recipient or
MOD
9. Foreign and
Commonwealth personnel
attending Service training
courses
a. Sponsoring
authority
b. Recipient or
MOD
10. Staff of SHAPE,
NATO, Military etc
a. NATO (Note 3)
b. Recipient or
MOD
Notes:
1.
These items will also cover extra provision for guest and dining-in nights, catering for outside organisations etc.
2.
The mess bill is issued here only as a vehicle for passing on a VAT inclusive charge (eg for theatre tickets, laundry, etc).
3.
Where the taxable output of the Service Fund is not likely to exceed the annual limit laid down in HMRC Notice 700/1 ‘Should I be
registered for VAT?’ and the fund has no cause to register, the facilities shown as chargeable to zero-rated will be exempt from tax.
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AP3223
Leaflet 410
VALUE ADDED TAX - ACCOUNTING
Introduction
41001.
The application of VAT to Service Funds and activities is explained in Leaflets 218
and 409. This leaflet describes the procedures to be used to account for VAT in the Service Funds
books of account. It is therefore of primary interest to OICs and clerical staff of those funds and
activities which are registered for VAT purposes. The procedures explained in the following
paragraphs satisfy the requirements of HMRC.
The basic rules
41002.
The procedures by which Service Funds and activities account for VAT are
governed by two basic rules which are designed to keep the accounting process as simple as
possible and which must be observed at all times. The rules are:
a.
Deductible input tax and output tax are to be calculated in the books of prime entry
ie the cash-book (CB), purchases book (PB) and the subscriptions and charges book (SCB).
The only exceptions being function accounts (para 41004j) where VAT calculations are made
within the ledger account.
b.
Non-deductible input tax is to be charged to the appropriate expenditure accounts,
ie the full purchase price is charged.
Books of prime entry
41003.
Details of the modifications required in each of the books of prime entry to
accommodate VAT records are described below together with details of the accounting action
required in respect of all transactions affected by VAT:
a.
Cash-book. Cash purchases and sales attract VAT and this must be accounted for
within the CB as follows:
(1)
Analytical cash-books. Separate columns should be ruled on each side of
the CB, headed VAT, and used to record deductible input tax (payments side) and
output tax (receipts side) in respect of each taxable transaction. At the end of the
month the totals in the VAT columns are posted to the appropriate sides of the VAT
account. An example of accounting when an analysed CB is used is shown at Annex
A.
b.
Purchases book. An extra column is ruled in the PB to record deductible input tax
on all credit purchases (care must be taken to action only 'deductible' input tax - see Leaflet
409), and the total posted to the debit side of the VAT account at the end of the month. See
examples at Annexes C and D to Leaflet 403.
c.
Subscriptions and charges book. The SCB records credit sales to mess
members and provides a convenient monthly summary of the taxable turnover. Members
have different liabilities depending on their status (eg RAF or civilians) and the monthly
turnover has to be analysed into taxable zero-rated, taxable standard rate and non-taxable
totals. At the end of the month output tax should be calculated from the gross departmental
totals and:
410-1
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(1)
The revised totals posted to the credit side of the departmental accounts in
the impersonal ledger.
(2)
The total output VAT posted to the credit side of the VAT account in the
impersonal ledger. An example is shown at Annex A, Example 2.
Impersonal ledger
41004. Ledger accounts. In order to complete the double-entry for the VAT transactions in the
books of prime entry a corresponding entry must be made in the VAT account in the impersonal
ledger. Similarly, there are a variety of internal adjustments within accounts which attract VAT and
which are accounted for within the ledger. The following list includes those accounts most affected
by the tax and describes, in each case, how VAT should be accounted for:
a.
VAT. A separate VAT account is to be maintained to which deductible input tax is
to be debited and output tax credited. This account provides the interface between the fund
and HMRC; it is to be balanced monthly and the balance is to be carried forward at the end
of the audit period. An example of a VAT account is given at Annex A, Example 3.
b.
Bar (including home consumption). Input tax is deductible on all purchases for
resale and purchases essential to allow trading to continue eg bar coolers, stock-books, bar
staff meals, etc. All bar sales with the exception of certain sundries attract output tax. The
bar sales recorded on the credit side of the bar income account are at VAT exclusive prices,
the VAT being actioned direct from the CB or SCB. Sundries sold at cost price do not attract
VAT and input tax is not deductible and output tax is not recovered.
c.
Messing. Most food is zero-rated, however, some food and other goods and
services purchased by this account may attract input tax which is deductible as the goods or
services are considered as trading expenses. Deductions made from a serviceman's pay to
cover basic food costs are outside the scope of VAT. All other charges such as the service
(public) element involved in preparing and serving goods are taxable. Therefore, all sales
from the messing account in respect of casual meals and extra messing attract output tax.
Receipts for swill are not liable to VAT. See illustration at Annex A, Example 6.
d.
Maintenance, silver and library. Purchases debited to these expenditure
accounts are not made in the course of business and input tax is not deductible.
e.
Subscriptions. Output tax is not levied on subscriptions paid by servicemen who
are full members of the officers' mess or SNCOs' mess, as membership is compulsory under
QRs and thus outside the scope of VAT. Subscriptions paid in excess of the limits laid down
in Leaflets 610 and 806 are classed as voluntary contributions and are subject to tax at the
standard rate of VAT. Subscriptions paid by civilians and F&C personnel are also classed as
voluntary and attract VAT at the standard rate.
f.
Recoveries. When goods and services on credit are paid initially by the mess, club
or activity, and then recovered from the member, input tax is not deductible.
g.
Gaming machines. Input tax in respect of rental of gaming machines is deductible
and is analysed in the PB. Output tax is deducted from the gross takings and entered in the
VAT column in the CB. Where machines are hired the amount paid to the hirer will be total
takings less hire and service charges and associated VAT. Output tax is to be paid on the
gross takings and input tax claimed on hire and service charges. Further information is given
in VAT Leaflet 701/13 ‘Gaming and amusement machines’.
410-2
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h.
Washing machines, amusement machines, vending machines, etc. Action is
taken as described in sub-para f.
i.
Restricted subscriptions/levies. Input tax on all purchases is deductible and,
where still imposed, specified monthly subscriptions or levies (for example special
entertainments) are subject to output tax, as shown in Annex A, Example 2.
j.
Functions. Input tax on all purchases is deductible. All purchases should,
therefore, exclude input tax which has already been posted to the debit side of the VAT
account from the CB, PB or departmental trading account, and only the net purchase
actioned to the function account. Output tax is charged on the levies raised against
members who attend functions, however, the amount of output tax will vary if a subsidy has
been approved from mess funds. Examples of how output tax is calculated are given at
Annex C. (See also Leaflet 408). Functions include guest nights, ladies guest nights,
summer balls, receptions, dining-in nights, etc.
k.
Miscellaneous. Output tax at the standard rate is to be recovered from income
derived from the following sources:
(1)
Non-public garage income.
(2)
Admission charges to tombola.
(3)
Admission charges to cinema (film shows).
(4)
Swimming pool ticket sales.
(5)
Block membership subscriptions to swimming pools, bowling alleys, etc
where given in lieu of entrance/admission fees.
(6)
Bowling centre playing fees, shoe and locker rentals.
(7)
Service Fund club/fund subscriptions and charges for using club/fund
equipment.
(8)
Voluntary donations, but only when in return for a supply or service (eg
civilian mess members’ subscriptions).
l.
Grants. The sources of a mess’s unrestricted annual income have either already
been taxed (eg voluntary mess subscriptions of civilian personnel, bar income, gaming
machine profits etc) or are outside the scope of VAT (eg compulsory mess subscriptions of
RAF personnel, investment dividends, interest etc). Therefore, subsidies from the mess
unrestricted annual income are not subject to VAT. Similarly grants made from the public
account are not subject to VAT.
Outside organisations
41005.
Functions held in messes, or clubs by and at the expense of outside organisations
(eg civil bodies, societies, etc) on a grace-and-favour basis are to be accounted for under normal
VAT rules.
Sale of non-public property
41006.
Sale of non-public property comes under the regulations dealing with the sale of
second-hand goods and output tax is liable on the full selling price. Silver, works of art and
410-3
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antiques are subject to a special ruling where the original buying price is assumed to include VAT;
output tax is therefore paid only on the difference if sold at a profit. Consequently if items are sold
at cost or less than no tax is chargeable. Items purchased before the introduction of VAT will be
assessed as having been purchased on 1 Apr 73. Further information is contained in HMRC
Notice No 700.
Staff entertainment expenses
41007. When a Service Fund provides free entertainment for its employees (eg staff party etc)
and can show that the cost is borne by the fund, any input tax incurred is deductible, subject to the
normal VAT rules. These rules apply only to the staff and not to attending mess or club members.
Benevolent funds
41008. Funds which provide for the dependants of Service personnel and whose income is by
voluntary subscription, donations from service personnel, etc, (eg RAF Benevolent Fund), are
outside the scope of VAT and are not required to pay tax on monies received or on disbursements
made to beneficiaries. They will, of course, pay tax which may be included in the price of any
goods purchased.
Annual balance sheet
41009.
The balance on the VAT account should be shown on the balance sheet under the
liabilities section if a credit, or under debtors in the assets section if a debit.
Stock certificates
41010. Monthly stock sheets are to be prepared using VAT exclusive prices and the total value
entered in the appropriate stock account. Where input tax is not deductible stocks are to be valued
at the VAT inclusive price.
Return of VAT - Form 100
41011. At quarterly intervals all registered Service Funds are to complete a return of their input
and output VAT for HMRC. The input and output taxes are totalled in the ledger account and the
figures entered on VAT Form 100, the difference being the amount owed to or by the fund for VAT.
Guidance on completing VAT Form 100 is given in HMRC Notice No 700 ‘The VAT Guide’.
Annexes:
A.
B.
VAT accounting using an analysed cash-book.
Accounting for VAT in function accounts.
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Leaflet 410 Annex A Not Released
410A-1
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410A-2
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AP3223
Leaflet 410
Annex B
ACCOUNTING FOR VAT IN FUNCTION ACCOUNTS (EG SUMMER BALL ACCOUNTS)
1.
Members pay whole cost.
£
Oct 31
2.
Oct 31
p
Purchases (1)
PB
580.82
Bar sales
IL2
109.81
Messing
IL4
79.94
Output VAT
IL6
115.58
£
Oct 31
Cost £770.57
VAT @ 10%
£77.06
SCB
847.63
£
£
Grant covers whole cost.
p
Purchases (1)
PB
580.82
Bar sales
IL2
109.81
Messing
IL4
79.94
Oct 22
Grant
IL1
p
770.57
770.57
Part grant plus members pay remaining cost.
£
Oct 31
847.63
847.63
770.57
3.
p
p
£
Purchases (1)
PB
580.82
Oct 1
Grant
Bar sales
IL2
109.81
Cost £270.57
Messing
IL4
79.94
VAT @ 10%
£27.06
VAT output
IL6
27.06
IL1
SCB
p
500
297.63
410B-1
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797.63
797.63
Note:
1.
All Purchases exclude DIVAT.
410B-2
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AP3223
Leaflet 411
PREPARATION OF MONTHLY STATEMENTS OF ACCOUNTS
Introduction
41101.
To assist OICs with financial planning and budgetary control, detailed statements of
account should be drawn up each month for every major Service Fund on a station. Simplified
statements should be prepared for each subsidiary activity and banked fund. This leaflet describes
the basic requirements for the production of monthly statements of account: the actual information
given in practice will vary with the size and complexity of individual funds and accounts, and with
the requirements of their OICs.
41102.
As a general rule a detailed statement of account will only be prepared for the three
main funds (the officers' and SNCOs' messes and the Service Institute Fund) but one should also
be prepared for any other fund that maintains ledger accounts (ie it is treated as a separate
company on Sage). The simplified statements prepared for small activities will normally only show
the balance held in their account and any income/expenditure over the month. All statements
should be prepared and promulgated as soon as possible during the month following that to which
they relate.
Closing the ledger account
41103.
The fund clerk should ensure that all postings to the ledgers from the books of prime
entry (eg cash-book, purchases book, journal, etc) are complete. Stock values as extracted from
the certificates rendered by the stockholders and reserves in respect of accruals and prepayments
(see Leaflet 404) should be entered in the appropriate ledger account.
41104.
The balance on each account should be calculated and entered on the appropriate
side of the ledger account so that both sides agree. Each account should then be ruled off and
totalled, and the balance, stocks and reserves should be brought down on the opposite side of the
accounts.
Trial balance
41105.
The trial balance is a schedule of the debit and credit balances extracted from the
ledger, plus the cash and bank balances. As the double entry system requires the value of debit
entries to equal the value of the corresponding entries on the opposite side of the accounts, the
trial balance must agree.
41106.
The trial balance is to be recorded in a suitably ruled book, which is to be retained
for audit. The balances brought down in the ledger (including stocks and reserves), plus the cash
and bank balances, should be listed on the trial balance and the two sides totalled and compared
(see example at Annex A).
41107.
the error(s):
If the trial balance does not agree, the following procedure should be used to trace
a.
Ascertain the difference between the two sides.
b.
Check the addition of each side of the trial balance.
411-1
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c.
The trial balance difference might result from only one error and the following
checks should be made as a first stage in tracing the error:
(1)
Divide the difference by two and check to see if the resultant amount
appears in the trial balance; if it does, the entry may be on the wrong side.
(2)
If the difference is divisible by nine, look for a possible transcription error, eg
£154.60 as £15.46, £48.29 as £29.48 or £75 as £57.
d.
Examine the previous trial balance and compare the entries with the current trial
balance; this may reveal the omission of an account.
e.
Examine each ledger account and check that the additions and the balances are
correct.
f.
Check that the previous month's balances and reserves have been brought forward
correctly.
g.
Examine the control accounts and verify that the balances agree with the total of
individual balances controlled, eg mess bills, purchases, subsidiary cash-book.
h.
Check all postings from the books of prime entry to the ledgers, and all internal
ledger postings, at the same time checking that the contra entries in the cash-book are
correct.
i.
Check the bank reconciliation and the additions and amounts carried and brought
forward in the cash-book.
41108.
The agreement of the trial balance is no more than prima facie evidence of the
arithmetical accuracy of the accounts, and certain kinds of error can be made which will not
prevent the trial balance agreeing. Examples of these are:
a.
The omission of a complete transaction from the accounts.
b.
The posting of an item to the wrong account.
c.
Errors in the books of prime entry.
d.
Compensating arithmetical errors.
Income and expenditure accounts
41109.
Once the trial balance is agreed the balances in the revenue line entries should be
extracted from it and posted to the appropriate sides of the income and expenditure account. This
account can then be balanced and the resultant balance, representing surplus or deficit on the
month's trading, should be added to/subtracted from the capital balance in the monthly statement
of account. No ledger entries should be made.
Statement of account
41110.
Working from the remaining figures in the trial balance, a statement of account is to
be prepared in the form of a balance sheet (vertical presentation) as shown in the example at
Annex B. The figures shown in the statement are the totals of balances under each main heading,
supporting detail being supplied in such schedules as are considered necessary. As a further aid
to management control, the following information is also to be included, where applicable:
411-2
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a.
Income and expenditure account.
b.
A liquidity statement (see Leaflet 304).
c.
A statement of the gross profit percentage achieved by each trading activity
including the figures for previous months of the audit period (see Leaflet 309 and the
example given in Annex B).
Information for OICs of subsidiary activities and banked funds
41111.
When the monthly statements of account have been completed, notification of the
balance on their accounts should be sent (in the form of Annex C) to the OICs of all subsidiary
activities and banked funds who may query the balance with the book-keeper at any time to
resolve any differences. The example given at Annex C will be suitable for the majority of small
clubs and activities who only operate one account; it may be necessary to expand the statement
where an activity has two or more line entries and, where any form of trading takes place, eg bars
or canteens, a statement of gross profit percentage should also be supplied (see example at
Annex B).
Annexes:
A.
B.
C.
Example of a trial balance.
Example of a monthly statement of account.
Example of a simplified statement of account for issue to subsidiary activities.
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AP3223
Leaflet 411
Annex A
EXAMPLE OF A TRIAL BALANCE
Item
Cash in hand
DR
CR
£
£
234.67
Floats
Bank current account
200.00
1,383.54
Bank deposit account
5,000.00
Equity shares
42,574.73
Bonds
15,659.62
Capital property
14,255.00
Tangible property
2,874.57
Mess bills
3,648.56
Investment provisioned income
183.24
Official function provisioned income
634.83
Bar stock
6,826.54
Sundries stock
476.23
PRS prepayment
120.00
Trade creditors
9,966.59
VAT liability
Outstanding functions
Independent examination accrual
256.78
235.67
500.00
Contingent liability
20,487.00
Unrealised profit/loss on equity
Unrealised profit/loss on bonds
Accrued unrealised profit/loss on equity
Accrued unrealised profit/loss on bonds
1,000.32
159.30
1,574.40
500.33
Unrestricted income
18,897.88
Property held
17,109.57
Subscription income
45,876.48
Investment income
723.59
Bar sales income
Sundries sales income
68,150.85
679.60
Bar surplus income
106.47
Official function income
67,568.31
Function admin fees income
838.41
Christmas draw prizes income
11,927.50
Bonfire night grant
600.00
Deployed families grant
150.00
COs’ Benevolent Fund grant
Station families’ day grant
300.00
500.00
Bar cost of goods sold
Sundries cost of goods sold
57,399.22
5,879.55
411A-1
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Bar expenses
Bar surplus expenditure
Maintenance expenditure
Improvements expenditure
Official function expenditure
Insurance expenditure
Entertainments expenditure
PMC’s contingency expenditure
Christmas draw prizes expenditure
Internal audit fees
Independent examination fees
1,909.87
106.47
16,510.83
8,486.40
52,568.31
897.69
14,132.94
378.74
11,927.50
240.00
500.00
266,599.05
266,599.05
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AP3223
Leaflet 411
Annex B
EXAMPLE OF A MONTHLY STATEMENT OF ACCOUNT
OFFICERS' MESS STATEMENT OF ACCOUNT AS AT 31 MAY 10
£
£
Assets:
Equity shares
Bonds
Capital property
Tangible property
Long term assets
42,574.73
15,659.62
14,255.00
2,874.57
75,363.92
Cash in hand
Floats
Bank current account
Bank deposit account
Mess bills
Provisioned incomes
Stocks
Prepayments
Current assets
234.67
200.00
1,383.54
5,000.00
3,648.56
818.07
7,302.77
120.00
18,707.61
Liabilities:
Creditors
Outstanding expenses
Accruals
Current liabilities
9,966.59
492.45
500.00
10,959.04
Net current assets
7,748.57
Net assets
84,950.75
Represented by:
Contingent liability
Property
Unrestricted Income Fund
Accrued unrealised profit on investments
Profit from income and expenditure account (FY 09/10)
Unrealised profit on investments (FY 09/10)
20,487.00
17,109.57
18,897.88
2,074.73
23,383.69
1,159.62
83,112.49
411B-1
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MONTHLY COMPARISON OF GPP (ACHIEVED) AGAINST TARGET FIGURE
May 2010
Month of Audit Period
Account
1
2
3
4
5
6
7
8
9
10
11
12
Ave
GPP
%
Target
GPP
%
Net
Diff
%
10.1
10.3
9.4
9.8
9.9
10.1
9.9
10
-0.1
Sundries
2.3
2.4
3.1
3.0
3.2
2.8
2.8
3
-0.2
Home C
4.9
5.0
5.0
5.2
4.8
5.1
5.1
5
+0.1
Bar
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AP3223
Leaflet 411
Annex C
EXAMPLE OF SIMPLIFIED STATEMENT OF ACCOUNT FOR ISSUE TO SUBSIDIARY
ACTIVITIES
To: OIC Rugby Club Fund
MONTHLY STATEMENT OF ACCOUNT
The balance held at SFAS in respect of the above fund as at 31 May 10 is £127.83.
The attached transaction history details all deposits and withdrawals for the month of May 10.
(Only include where Sage software is available)
You are requested to check these records against your own records to confirm the figure. If there is
any discrepancy you should contact the SFAS book-keeper as soon as possible.
Signature……………………………….
Rank………………………………………
.
Appointment……………………………..
Date……………………………………
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AP3223
Leaflet 412
PREPARATION OF ANNUAL ACCOUNTS
Introduction
41201.
A complete set of accounts is to be drawn up annually, to an accounting date as
directed by HQ AIR Service Funds. The accounting date may be changed with the approval of
DACOS CS, subject to the requirement of the Charities Acts, that no accounting period shall
exceed 18 months.
41202.
The purpose of this leaflet is to describe the procedure to be followed when
preparing the annual accounts.
Closing the ledger accounts
41203.
The ledger accounts are to be closed and a trial balance compiled and agreed as
described in Leaflet 411. Balances representing profits or losses on revenue accounts are to be
transferred to the income and expenditure (I&E) account. When all such balances have been
transferred, the I&E account is to be closed and the balance transferred to the Unrestricted Income
Fund within the capital account.
Balance sheet
41204.
The accounts remaining in the trial balance after the I&E account has been
prepared should be used, subject to adjustments for debtors, creditors, etc, to prepare a balance
sheet in vertical format. Comparative figures for the corresponding previous period are to be
shown on the left-hand side. An example of the layout is given at Annex A.
41205.
To avoid distorting the surplus or deficit of the current period special care is needed
in the treatment of extraordinary items of income and expenditure. The significance of the amount
should be considered and if the sum is small, no special treatment is necessary and the
transaction should be processed through the accounts in the normal way. If, however, the amount
is significant, it is to be disclosed separately on the balance sheet and explained by way of a
footnote. Examples of such items are:
a.
Profits or losses arising on the sale of investments.
b.
Items relating to previous periods, for which no provision was made at the time.
c.
Uninsured losses.
41206.
The Contingent Liability to the RAF Central Fund is to be included within the capital
section of the balance sheet and, where a mess or club has entered into a contract, the balance of
the commitments due in respect of each contract is also to be shown as a footnote on the balance
sheet.
41207. Investments should be revalued at the end of each financial year and shown on the balance
sheet as fixed assets at market value. The historic cost (purchase value) of investments should
also be disclosed as a footnote to the balance sheet. An example of the layout is given at Annex
A.
Supporting information
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41208.
The following documents are to be presented with the balance sheet:
a.
Schedules supporting the summarised information given in the balance sheet.
(where applicable)
b.
The income and expenditure account.
c.
A liquidity statement.
d.
Mess bill control account (where applicable).
e.
GPP analysis (where applicable). See Annex B to Leaflet 411..
The supporting documents (see also para 41209) are to be firmly attached to the balance sheet
and assembled, with an outside cover, as shown at Annex A.
Audit
41209.
Once the balance sheet has been completed it will be subjected to detailed scrutiny
by the Service Funds Internal Audit Board (SFIAB) (as required by QR 1298) and formal
Independent Examination (where applicable). The supporting accounting records and documents
will have also been subject to the running audit throughout the accounting year.
Certification
41210.
On completion of the SFIAB audit and any civilian audit the following certificates are
to be entered on the balance sheet and completed by the officers responsible:
a.
Certificate as to correctness. Balance sheets are to be certified as to their
correctness by OIC SFAS and the following officials:
(1)
Officers' mess - by the PMC.
(2)
SNCOs' mess - by the OIC (or CMC if no OIC exists).
(3)
Service Institute Fund - by the PSI.
(4)
Other non-public funds - by the OIC.
b.
SFIAB’s certificate. The following certificate is to be signed by the President and
members of the SFIAB:
Certified that the RAF Briton XXXX Fund has been audited in accordance with QR
1298 and AP3223 Chapter 5.
PSFIAB:
Signature……………………………………………………
Rank / Name………………………………………………
Date…………………………………………………………
SFIAB Member: Signature……………………………………………………
Rank / Name………………………………………………
Date…………………………………………………………
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Audit Clerk:
Signature……………………………………………………
Grade / Name………………………………………………
Date…………………………………………………………
c.
Civilian auditor's certificate. Whenever a civilian auditor is employed, an audit
certificate is to be entered on the balance sheet and signed by the auditors confirming that
the balance sheet is in agreement with the books of account and gives a true and fAir view of
the state of affairs of the fund as at the date of the end of the audit period.
41211. Independent examiner’s certificate. On completion of the Independent Examination of
the accounts, where applicable, the independent examiner’s certificate is to be attached to each
balance sheet.
Annex:
A.
Example of statement of accounts.
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