IGCSE Clubs & Societies Accounts
In this lesson, we will learn how to prepare the receipts and payment account, income and expenditure account, subscription account and the shop and cafe accounts. We will also learn the reporting in the financial statements.
Related Lessons:
Receipts & Payments Accounts
The Receipt & Payment account is similar to the Cash Book, where it records all money received on the debit side and money paid on the credit side. However, unlike the Cash Book, it does not differentiate between cash and bank transactions.
A debit balance of this account is recorded as a Current Asset in the Statement of financial position, while a credit balance is recorded as a Current Liability.
Subscription Account
Subscriptions, which is the main source of income for clubs and societies, are fees received from its members.
As an income account, it is adjusted for prepaid and accrued income as well.
At the start of the financial year, a debit balance represents Accrued Subscription brought forward from the previous accounting year; while a credit balance represents Prepaid Subscription.
Fees received during the financial year is credited to the account since income increases.
At the end of the accounting year, Accrued Subscription is credited to the account and is recorded as a Current Asset.
On the other hand, Prepaid Subscription is debited to the account and is recorded as a Current Liability.
These amounts are brought down to the opposite side of the account on the next accounting year.
The balancing figure of the account represents the actual subscription income earned for the financial year and is transferred to the Income and Expenditure account.
Shop or Cafe Income Statement
To serve the needs of its members, clubs and societies may operate a shop that sells products required by its members or a cafe to meet the dining of its members. Earnings from the shop or cafe forms part of the club’s income.
The profit or loss from the shop or cafe will be transferred to the Income & Expenditure account in order for the club or society to determine their final profit or loss for the financial year.
To determine the profit or loss made by the shop or cafe, an income statement is prepared. This is prepared in the exact same way as the income statement of a sole trader.
Income & Expenditure Account
The Income & Expenditure account is prepared in order for the club or society to determine if it makes a gain or loss from its operation.
This account is prepared based on the same principle as that of an Income Statement of a sole proprietor.
Fees earned from subscriptions, competitions or fund-raising activities and income generated from the café or shop operated by the club or society are reported as total income in the Income and Expenditure Account.
- Total fees earned from subscription is obtained from the Subscription Account.
- Income from the cafe or shop is extracted from the cafe’s or shop’s Income Statement.
- Fees earned from competition or fund-raising activities are recorded in the Income & Expenditure account where the fees received and expenses related to it are set off against each other to determine the profit or loss for that activity.
When income exceeds expenditure, the club or society earns a surplus for the year. When expenditure exceeds income, the club or society incurs a deficit for the year.
The surplus or deficit for the year is added to or deducted from the Accumulated Funds in the Statement of Financial Position of the club or society.
Recording in the Statement of financial position
The Statement of financial position of a club or society is prepared based on the same principle as that of a sole proprietor.
However, as the club or society do not have an owner, there is no Owner’s Equity. Instead, it is replaced with Accumulated Funds.
To calculate accumulated funds,
Balance brought down from previous period + Current year’s surplus (or – Current year’s deficit)