ACCOUNTING FOR CLUBS AND SOCIETIES

1
ACCOUNTING FOR CLUBS AND SOCIETIES

• Clubs and Societies are run to further the
  promotion of an activity or group of activities
  NOT TO MAKE A PROFIT, hence the accounting
  procedure is somewhat different.

2
CLUBS SOCIETIES

• Rather than accounting via a Trading, Profit and
  Loss Account, such organisations use either a
  RECEIPTS AND PAYMENTS ACCOUNT, or an INCOME AND
  EXPENDITURE ACCOUNT.

3
RECEIPTS AND PAYMENT ACCOUNT

• THE HOMERS RUNNING CLUB
• Receipts and Payments Account Year Ended 31
  December 2005
• Receipts Payments
• Bank balance as at 01/01/05 236 Groundsmans
  wages 728
• Subscriptions received in 2005 1,148 Sports
  ground rental 296
• Rent received 116 Committee expenses 58
• Printing Stationery 33
• Bank balance 31/12/05 385
• 1,500 1,500

4
CLUBS SOCIETIES

• When a club or society however, has assets and
  liabilities, the receipts and payments account is
  an unsatisfactory way of preparing accounts, as
  it merely shows the cash position.
• Thus an INCOME AND EXPENDITURE ACCOUNT is
  prepared and presented together with a balance
  sheet.

5
INCOME EXPENDITURE ACCOUNT

• An Income and Expenditure Account, is effectively
  the Profit and Loss Account of a non-profit
  making organisation.
• Rather than deriving a profit or loss for a
  period (usually one year), this account
  determines either the SURPLUS OF INCOME OVER
  EXPENDITURE, or the EXCESS OF EXPENDITURE OVER
  INCOME.
• This amount is either credited or debited to an
  account normally called the ACCUMULATED FUND,
  which replaces the Capital figure in the balance
  sheet.

6
ROVERS FOOTBALL CLUBINCOME EXPENDITURE
ACCOUNTYEAR ENDED 31 DECEMBER 2006

• INCOME
• Subscriptions 1,302
• Profit from Bar 813
• Donations received 120
• 2,235
• EXPENDITURE
• Wages Groundsman 939
• Repairs to stands 119
• Grounds upkeep 229
• Secretarys expenses 138
• Transport costs 370
• Depreciation Stands 200
• Equipment 110 310 2,105
• SURPLUS OF INCOME OVER EXPENDITURE 130

7
INCOME EXPENDITURE ACCOUNT

• It is possible to prepare an Income and
  Expenditure account from whatever records that
  are available, however it is more usual to take a
  receipts and payments account (cash book summary)
  as the starting point.

8
INCOME EXPENDITURE ACCOUNT

• Turning this into an Income and Expenditure
  account involves
• Separating capital and revenue expenditure.
• Making provision for accrued expenditure.
• Accounting for prepayments.
• Providing for depreciation.

9
POINTS TO NOTE

• Where the organisation has carried out an
  activity deliberately so as to make a profit to
  help finance its main activities, for example
  running a bar, for this profit aimed activity, a
  Trading, or Profit and Loss account must be drawn
  up.
• The profit or loss generated, would then be
  transferred to the Income and Expenditure account.

10
POINTS TO NOTE

• In some clubs and societies, members can make a
  one-off payment for life membership.
• Such income should not be treated as income
  solely in the year of receipt (which concept
  would suggest this).
• Rather, it should be credited to a LIFE
  MEMBERSHIP ACCOUNT, and transfers should be made
  from that account to the credit side of the
  Income and Expenditure account, on an appropriate
  basis.
• The balance on the life membership income
  account, thus represents deferred income.

11
POINTS TO NOTE

• Entrance fees should be treated as income in the
  year of receipt.
• Similarly, donations are usually shown as income
  in the year that they are received.

12
POINTS TO NOTE

• Outstanding subscriptions represent debtors of
  the organisation.
• However, many members may leave without ever
  paying the outstanding amount.
• Thus to bring them into account, would appear to
  contravene the prudence concept.
• In examinations, they should be treated as
  debtors, unless otherwise instructed

13
EXAMPLE

• The following trial balance of Haven Golf Club
  was extracted from the books as on 31 December
  2008

14
EXAMPLE

• Dr Cr
• Clubhouse 21,000
• Equipment 6,809
• Profits from raffles 4,980
• Subscriptions received 18,760
• Wages of bar staff 2,809
• Bar stocks (01/01/2008) 1,764
• Bar purchases and sales 11,658 17,973
• Greenkeepers wages 7,698
• Golf professionals salary 6,000
• General expenses 580
• Cash at bank 1,570
• Accumulated Fund (01/01/2008) 18,175
• 59,888 59,888

15
NOTES

• Bar purchases and sales were on a cash basis.
  Bar stocks at 31 December 2008 were valued
  at 989.
• Subscriptions paid in advance by members at 31
  December 2008 amounted to 180.
• A provision is to be made for depreciation of
  equipment amounting to 760.

16
REQUIRED

• Draw up the bar trading account for the year
  ended 31 December 2008
• Draw up the income and expenditure account for
  the year ended 31 December 2008, and a balance
  sheet as at that date.

17
EXAMPLE

• Haven Golf Club
• Bar Trading Account
• Year Ended 31 December 2008
• Sales 17,973
• COST OF SALES
• Opening stock 1,764
• Purchases 11,658
• 13,422
• Closing stock ( 989) 12,433
• GROSS PROFIT 5,540
• Wages of bar staff (2,809)
• Profit from Bar (Income Expenditure) 2,731

18
EXAMPLE

• Haven Golf Club
• Income and Expenditure Account
• Year Ended 31 December 2008
• INCOME
• Subscriptions (18,760 -180) 18,580
• Profits from raffles 4,980
• Profit from bar 2,731
• 26,291
• EXPENDITURE
• Greenkeepers wages 7,698
• Golf professionals salary 6,000
• General expenses 580
• Depreciation Equipment 760 15,038
• SURPLUS OF INCOME OVER EXPENDITURE 11,253

19
EXAMPLE

• Haven Golf Club
• Balance Sheet as at 31 December 2008
• FIXED ASSETS Cost Dep. NBV
• Clubhouse 21,000 21,000
• Equipment 6,809 760 6,049
• 27,809 760 27,049
• CURRENT ASSETS
• Bar stock 989
• Bank Balance 1,570
• 2,559
• CURRENT LIABILITIES
• Subscriptions received in advance (180)
• NET CURRENT ASSETS 2,379
• 29,428
• ACCUMULATED FUND
• Balance brought forward 18,175
• Surplus of income over expenditure 11,253
• 29,428