ACCOUNTING AND FINANCE
ESSENTIAL STUDY GUIDE
CONTAINING
UNIT 3 REVISION NOTES
1
ACCOUNTING AND FINANCE
My Club - The Final Accounts
UNIT
3A/B
REVISION
NOTES
Clubs, and other not-for-profit organisations, must prepare a set of accounts to
present to its members at its Annual General Meeting since, although a club’s main
function is to provide a service to its members and not necessarily to make a surplus
(a profit), the club be accountable for it’s stewardship of (how it uses) the money it is
responsible for. These accounts consist of a:
 A Receipts and Payments Account – similar to a ‘cash budget’, showing all
cash/cheques received and paid out during the year, regardless of what and when
they are for. The information for this statement can be gathered on a day-to-day
basis using a cash analysis sheet (see the example on page 3).
 An Income and Expenditure Account – the club’s 'profit and loss' statement
showing only revenue items adjusted to represent the current year's figures only.
To do this, deduct all accruals and add on prepayments in existence at the
beginning of the year, but add accruals and deduct prepayments existing at the
end of the year.
 A Balance Sheet – shows the value of the club’s capital items and the accumulated
fund at end of the year (the value of the club’s assets-liabilities).
INCOME AND EXPENDITURE ACCOUNT
DEPRECIATION
ACCRUALS
PREPAYMENTS
REVENUE
CAPITAL
SUBSCRIPTIONS
An INCOME AND EXPENDITURE ACCOUNT is prepared after the club has
drawn up its Receipts and Payments Account for the period which, as you will
remember from Unit 1, records all cash/cheques received and paid out during the
period, regardless of what for and when, and calculates the club's closing bank
balance at the end of the period.
The purpose of the Income and Expenditure Account is to see if a SURPLUS (profit)
or DEFICIT (loss) has been made. It records only revenue items applying to the
period covered by the account. REVENUE items are weekly or monthly income and
running costs which keep the club 'ticking over' throughout the year, eg subscriptions
(revenue income) and rent (revenue expenditure). These items are adjusted for
PREPAYMENTS (payments in advance) and ACCRUALS (unpaid bills) so that
they represent only the amount applying to the date in the heading of the account.
CAPITAL ITEMS eg the purchase of Fixed Assets, Loans Received and Loan
Repayments are included in the Balance Sheet, NOT in the Income and Expenditure
Account.
2
JOKER BRIDGE CLUB
Cash Analysis Sheet for period ended 31 January
31 Dec
Raffle
Vending
Machine
Coaching
Grant
Stationery
Loan
Raffle
Dance
Refreshments
Equipment
Honorarium
Light and
Heat
Wages
Balance
Loan
Subscriptions
Raffle Prizes
Donations
Dance Expenses
Dance Receipts
Raffle Receipts
Subscriptions
Subscriptions
Loan
Card Tables
Stationery etc
Light and Heat
Stationery etc
Donations
TOTALS
Loan
01-Feb
03-Feb
28-Feb
02-Mar
18-Mar
20-Mar
25-Mar
01-Apr
11-Apr
14-Jun
18-Jun
18-Sep
21-Sep
11-Oct
12-Nov
19-Nov
Balance
Dance
Details
Donations
Date
Payments
Subscriptions
Receipts
£
£
£
£
£
£
£
£
£
£
£
£
£
£
£
£
£
£
1735
1000
2735
3235
3163
3193
3130
3355
3523
3723
3753
3553
3405
3355
3309
3276
3296
500
72
30
63
225
168
200
30
200
148
50
46
33
730
20
50
225
1000
168
0
0
0
3
83
200
72
63
0
148
0
46
0
ACCOUNTING AND FINANCE
My Club
UNIT
3A/B
REVISION
NOTES
HOW TO DEAL WITH ACCRUED EXPENSES - Expenses accrued at the
beginning of the year should have been paid the previous year and are excluded from
this year's account. Expenses accrued at the end of the period apply to this year and
are included.
Example:
Rent due and unpaid at 1 January 2005
Rent paid during the year to 31 December 2005
Rent due and unpaid at 31 December 2005
£200
£5,000
£150
Rent of premises for year ended 31 December 2005 for inclusion in the Expenditure
section of the Income and Expenditure Account for year ended 31 December 2005
will be calculated as follows:
Rent paid during the year
Less Rent due at 1 Jan (applies to 2004)
£5,000
200
4,800
150
£4,950
Add Rent due at 31 Dec (applies to 2005)
Rent for the year 1 Jan 2005-31 Dec 2005
HOW TO DEAL WITH PREPAID EXPENSES - Expenses prepaid at the
beginning of the year, apply to this year and are included in this year's account.
Prepayments at the end of the period apply to next year and are excluded from this
year's Income and Expenditure Account.
Example:
Insurance prepaid at 1 January 2005
Insurance paid during the year to 31 December 2005
Insurance prepaid at 31 December 2005
£350
£2,000
£100
Insurance for year ended 31 December 2005 for inclusion in the Expenditure section
of the Income and Expenditure Account for year ended 31 December 2005 will be
calculated as follows:
Insurance paid during the year
Add Insurance prepaid at 1 Jan (applies to 2005)
Less Insurance prepaid at 31 Dec (applies to 2006)
Insurance for the year 1 Jan 2005-31 Dec 2005
4
£2,000
350
2,350
100
£2,450
ACCOUNTING AND FINANCE
My Club
UNIT
3A/B
REVISION
NOTES
SUBSCRIPTIONS IN THE INCOME AND EXPENDITURE ACCOUNT
SUBSCRIPTIONS are what members pay to the club each year to keep up their
membership. The figure for subscriptions for the income and expenditure account is
what the club should have received from its members for the year in question.
When members pay subscriptions in advance, this amount is for the following year
and must be excluded – when they are in arrears at the end of the year, the club must
include this to show the total amount of subscriptions that should have been received
for the year.
Example:
Subscriptions
paid in Arrears
Subscriptions
paid in Advance
1 Jan 2005
£50
£100
31 Dec 2005
£30
£40
Subscriptions
Received
£800
Calculation of Subscriptions for the Income and Expenditure Account for year ended
31 December 2005:
Total Subscriptions received this year
£800
Add Subs in advance 1 Jan 05 (applies to 2005)
100
900
Less Subs in arrears 1 Jan 05 (applies to 2004)
50
850
Add Subs in arrears 31 Dec 2005(applies to 2005)
30
Was a current liability
in last year’s Balance
Sheet
Was a current asset in
last year’s Balance
Sheet
Is a current asset in
this year’s Balance
Sheet
880
Less Subs in advance 31 Dec 2005 (applies to 2006) 40
Subscriptions which should have been paid
for year ended 31 December 2005
Is a current liability in
this year’s Balance
Sheet
£840
£840 is the adjusted figure for subscriptions for the I & E Account for 2005
5
ACCOUNTING AND FINANCE
My Club
UNIT
3A/B
REVISION
NOTES
INCOME STATEMENTS
BAR TRADING ACCOUNT
SURPLUS
DEFICIT
ACCUMULATED FUND
STATEMENT OF AFFAIRS
INCOME STATEMENTS eg A BAR TRADING ACCOUNT
For each fund-raising event or activity the organisation runs, a separate income
statement or working note should be prepared to act as supplementary information to
the Income and Expenditure Account. This prevents the Income and Expenditure
Account having too many separate entries and the notes allow members to see the
profitability of each individual event run. When the activity eg the Bar makes a
profit this is entered as an income item, when the activity makes a loss eg an Annual
Dance, this is expenditure.
When all the adjusted revenue figures have been entered in the Income and
Expenditure Account, total expenditure is deducted from total income to reveal either
a SURPLUS (profit) or a DEFICIT (loss).
The Balance Sheet (also referred to as a Statement of Affairs) shows the value of
club's assets less its liabilities at the end of the year and is represented by its
ACCUMULATED FUND, the name given to the club's Net Worth. Calculate the
accumulated fund as follows:
The Opening Accumulated Fund ie the accumulated fund at the start of the year, is
the value of the club's assets at the beginning of the year less the value of its liabilities
at the start of the year. Any surplus from the Income and Expenditure Account is
added to (a deficit would be deducted from) the opening accumulated fund to give
Closing Accumulated Fund. Any Loan the club has is included at this point as it also
helps to finance the club.
6
ACCOUNTING AND FINANCE
My Club
UNIT
3A/B
REVISION
NOTES
CHAIRPERSON
SECRETARY
DONATION
AGM
TREASURER
SPONSORSHIP
HONORARIUM
GRANT
Club Officials/Office Bearers/Committee Members:
The CHAIRPERSON is appointed at the ANNUAL GENERAL MEETING (held
once a year to which all members are invited) and is responsible for directing the
meetings and is the spokesperson for the club.
The SECRETARY takes care of organising the meetings, together with the
Chairperson and is responsible for any correspondence to be sent out on behalf of the
club and for taking the minutes of meetings to be kept as a record of proceedings and
all decisions made.
The TREASURER looks after the finances of the club, deals with all the banking
matters and prepares the final accounts and financial reports for the committee and
club members.
These posts are voluntary and no salary is paid. Instead, an HONORARIUM is
usually paid in recognition of the time given and work done by club officials.
GRANTS are often given to clubs by Local Authorities to help finance equipment or
repairs to club premises and are not required to be repaid. They are therefore treated
as revenue income and not capital income as a loan would be.
DONATIONS are gifts to the club by members of the public or local firms and also
do not have to be paid back. Similarly SPONSORSHIP by local businesses can
provide clubs with equipment or sports strips in return for displaying the name of the
firm as a form of advertising. This is commonly used by football and rugby clubs as
a way of financing the cost of their equipment.
7
ACCOUNTING AND FINANCE
My Club - Bank Reconciliation
UNIT
3C
REVISION
NOTES
BANK RECONCILIATION STATEMENTS
CURRENT ACCOUNT
STANDING ORDER
DIRECT DEBIT
BANK GIRO CREDIT
BANK STATEMENT
BANK CHARGES
Clubs should open a current account at the bank for the safekeeping of the club’s cash
and to allow the treasurer to write cheques and set up STANDING ORDERS and
DIRECT DEBITS to pay the club’s regular bills.
The treasurer will keep a record of the receipts and payments of cash and cheques in
the club's bank account, debiting all receipts and crediting all payments, in the same
way a sole trader does. The bank balance at any point in time is shown in the balance
column. An alternative method is the Cash Analysis Sheet shown on page 3.
The bank will send the club a monthly printout ie the BANK STATEMENT,
showing all payments into and out of the account (as known to them) and showing
the monthly balance. This is the bank’s version of the club’s bank account.
It is often the case that the balance on the Bank Statement is different from the
bank balance in the club’s Bank Account for any or all of the following reasons:

cheques paid by the club for refreshments, transport, the secretary’s honorarium
etc may be 'NOT YET PRESENTED' ie (taken to the bank for cashing). The
club has recorded the payment but the bank has not because until the payee takes
the cheque to the bank to collect the money, the bank knows nothing about it.

cash deposits made by the treasurer for safekeeping (eg in the night safe) near the
date when the bank produces the bank statement. The treasurer has debited the
club’s bank account but it is possible that the 'DEPOSIT is NOT YET SHOWN'
ie(has not yet been processed by the bank) at the time the statement is issued.

STANDING ORDERS and DIRECT DEBITS the club has set up for making
regular payments for rent, insurance, electricity may have been forgotten by the
treasurer but they appear on the bank statement automatically because that is
their purpose. The bank has been asked by the club to remember to make these
payments on their behalf.
8
ACCOUNTING AND FINANCE
My Club - Bank Reconciliation
UNIT
3C
REVISION
NOTES

BANK CHARGES (eg for setting up SOs or DDs) or bank interest either
charged by the bank for servicing loans or given by the bank on the balance, etc
will appear on the bank statement but cannot be entered by the treasurer in the
club’s bank account until the statement informs them of how much the
interest/charges are.

payments made directly into the current account by debtors of the club or by
members paying their subscriptions by BANK GIRO CREDIT. The treasurer is
only likely to be aware of these when the Bank Statement arrives.
In order to reconcile the bank statement and the bank account (ie get the 2 bank
records to agree), the following 3 steps need to be taken.
STEP 1
Tick off all the matching items in the 2 records ie things that appear in
both the bank statement and in the bank account. These are the items
both the treasurer and the bank knows about. Circle the items you
cannot find a match for.
STEP 2
Using the unticked items in the bank statement, update the club’s bank
account. Remember to debit receipts and credit payments.
STEP 3
Using the unticked items in the club’s bank account, prepare a Bank
Reconciliation Statement.
9
ACCOUNTING AND FINANCE
My Club - Bank Reconciliation
UNIT
3C
REVISION
NOTES
SNAPPY CAMERA CLUB’S BANK ACCOUNT
DATE
Apr 1
Apr 6
Apr 9
Apr 18
Apr 26
Apr 27
Apr 28
Apr 30
DETAILS
DEBIT
Opening Balance
Sponsorship
250 00√
Hire of Hotel
Donation
20 00√
Rent
Subscriptions
800 00
Secretary’s Expenses
Advertising
as kept by the treasurer
CREDIT
BALANCE
2,860 00√
3,110 00
600 00√ 2,510 00
2,530 00
120 00√ 2,410 00
3,210 00
305 00
2,905 00
40 00
2,865 00
as prepared by
the Club’s Bank
BANK STATEMENT
To: Snappy Camera Club
Treasurer, 20 South Street, DALKEITH, EH22 7QQ
Date
Description
Apr 1
Opening Balance
Apr 6
Deposit
Apr 13
004223
Apr 15
Better Photo DD
Apr 19
Deposit
Apr 28
004256
Apr 30
Bank Charges
DR
CR
BALANCE
2,860.00√
250.00√
600.00√
2,510.00
60.00
2,450.00
20.00√
10
3,110.00
2,470.00
120.00√
2,350.00
10.00
2,340.00
ACCOUNTING AND FINANCE
My Club - Bank Reconciliation
UNIT
3C
REVISION
NOTES
Using the unticked items in the bank statement, update the club’s bank
account. Remember to debit receipts and credit payments. This brings the
club’s bank account up-to-date with the bank statement
SNAPPY CAMERA CLUB’S BANK ACCOUNT
DATE
Apr 1
Apr 6
Apr 9
Apr 18
Apr 26
Apr 27
Apr 28
Apr 30
Apr 30
Apr 10
DETAILS
DEBIT
Opening Balance
Sponsorship
250 00
Hire of Hotel
Donation
20 00
Rent
Subscriptions
800 00
Secretary’s Expenses
Advertising
DD Better Photo
Bank Charges
CREDIT
BALANCE
2,860 00
3,110 00
2,510 00
2,530 00
2,410 00
3,210 00
2,905 00
2,865 00
2,805 00
2,795 00
600 00
120 00
305
40
60
10
00
00
00
00
Using the unticked items in the club’s bank account, prepare a Bank
Reconciliation Statement. This brings the Bank Balance up to date with
the club's bank account and gets the 2 balances to agree.
BANK RECONCILIATION STATEMENT AS AT 30 APRIL …
£
Bank Statement Balance
£
2,340.00
Add Deposits not yet shown:
Subscriptions
800.00
3,140.00
Less Unpresented cheques:
Secretary’s Expenses
305.00
Advertising
40.00
As per corrected bank account balance
11
345.00
2,795.00
12