club and society

7/28/2019 Club and Society

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Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005

Accounting forClub andSociety


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Explain the types oforganizationsincluded under cluband society

Prepare thefinancial statementsof the club andsociety


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Operated without the intention of makingprofits.

Main function: provide facilities to its

members. For examples: Bowling Club,Football Club, and Golf Club.

Some clubs and societies may run a caf or arestaurant with the intention of getting extra

income.


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Non-profit organizations obtain their revenue fromseveral sources of income.

However, similar to trading concerns, it is important

to distinguish between revenue and capital income.


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Capital Income Revenue Income

Involve the receipts ofasset that will increase the

capital. For instance,donation (if stated forcapital purposes).

Involve the receipts ofincome for one accounting

year, such as subscriptionfees, entrance fees,visitors fees, locker fees,donations, and grosstrading profits from cafor restaurant.

Capital income will beshown as liability in thebalance sheet.

Revenue income will becredited in the incomeand expenditure account.


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There are two types of expenditures which are:capital expenditure

revenue expenditure


7/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005

Capital Expenditure Revenue Expenditure

Payment is made to

purchase assets such as

vehicle and office

equipment that will be

used to generate income

for the club.

Payment made for assets

and services to run daily

activity, such as rent,

wages, and insurance.

Assets are used for many

years.

Assets are used in that

accounting period.

Example: stationery.



Capital Expenditure Revenue Expenditure

Assets can be depreciated. Assets cannot be

depreciated.

These assets will be

shown as fixed assets in

the balance sheet.

These expenditure will be

debited in income and

expenditure account.

Capital expenditure will

not affect business profit.

Revenue expenditure

reduces business profit.



The organizations do not have trading andincome statement drawn up for them, astheir main purpose is not trading or profitoriented.

The final accounts prepared are:Receipts and Payments accounts, and

Income and Expenditure accounts.

A Balance Sheet, if they possess assets otherthan cash.



Profit MakingOrganization

Non-Profit MakingOrganization

Cash Account Receipts and Payments Account

Trading and Income Statement Income and Expenditure Account

Net Income Surplus of Income over Expenditure

Net Loss Excess of Expenditure over Income

Capital Accumulated Fund



Equivalent to a cash book.Prepared for the purpose of summarizing the

cash transaction during the reporting period.

Any receipts obtained during the period aredebited to the Receipts and PaymentsAccount.

Any payments made during the period arecredited to the Receipts and Payments

Account.Distinction between the capital and revenue

items is not required.



FPK Bowling Club

Receipts and Payments Account

For the year ended 31 December 2004

Receipts: RM Payments: RM

Bank/Cash balance 350 Committee expense 200Subscriptions received 810 Printing and stationery 210

Rent received 250 Utilities expense 150

Donation received 150 Donation allowed 150

Rent expense 140 Heat and light expense 110

Bank/Cash balance 600

1,560 1,560



Prepared for recording all the revenue incomeearned and revenue expenditures incurred in thecurrent year.

This account is similar to the trading and incomestatement of a trading concern.

Possible sources of income to be creditedtothe Income and Expenditure accounts are:subscription fees,entrance fees,

visitors fees, locker fees,donations, andgross trading profits from caf or restaurant.



The possible types of expenditures to be debitedto the Income and Expenditure accounts are: rent for club building,

staff wages,honorarium, and

insurance.



The difference between total income andtotal expenditure can be either:Surplus of Income over Expenditure (income is

greater than expenditure)

Excess of Expenditure over Income(expenditure is greater than income)


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When cash is received from members, the double entry wouldbe:

Debit Cash XX

Credit Subscriptions Account XX

Only the subscriptions received relating to the payment of thecurrent year is transferred to the Income and Expenditureaccount.

Payments in advance will be reported in the balance sheet as a

current liability. However, if the members have not paid the subscriptions until

the end of the accounting period, it will be shown in thebalance sheet as a current asset under the heading ofSubscriptions in Arrears orAccrued Subscriptions.



Subscriptions

2004 RM2004 RM

Beginning balance(arrears/accrued)

XXBeginning balance(advance/unearned)

XX

Income and Expenditureaccount

XXReceipts and Paymentsaccount

XX

Ending balance(advance/unearned)

XXEnding balance(arrears/accrued)

XX


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The FPK Bowling Club charges its members an annual subscription ofRM30 per member. It accrues for subscriptions owing at the end ofeach year and also adjusts for subscriptions received in advance. Thefollowing transactions are discovered at the end of the year:

On 1 January 2004, 15 members owed RM450 for the year 2003.

On 31 December 2003, 6 members paid RM180 for the year 2004. During the year 2004, we received cash for subscriptions RM11,130.

RM

For 2003 540

For 2004 10,380

For 2005 210

11,130 At the end of 31 December 2004, 17 members had not paid their 2004

subscriptions.

REQUIRED:

Based on the above information, prepare the subscriptions accountfor the year ended 31 December 2004 of the FPK Bowling Club.


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Subscriptions

2004: 2004:

1 January Beginning balance[Accrued Revenue(i)]

4501 January Beginning balance(Unearned) (ii)

180

31 December Income & Expenditure *11,16031 December Cash (iii) 11,130

31 December Ending balance(Unearned) (iii)

21031 December Ending balance(AccruedRevenue) (iv)

510

11,820 11,820

2005: 2005:

1 January Beginning balance(Accrued Revenue)(iv)

5101 January Beginning balance(Unearned) (iii)

210


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Members can enjoy the facilities of the clubs andbecome members for life by paying certain lump sumsubscriptions.

The subscriptions will not be treated as income inthe Income and Expenditure account solely in theyear it is received. A separate life membershipsubscription account will be prepared.

The life subscription will be written off annually tothe Income and Expenditure account by instalmentsand the credit balance remaining at the end of eachyear will be shown in the balance sheet as liability.


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The FPK Bowling Club requires a member to payRM3,000 to obtain life membership. During the yearended 31 December 2004, this club had received

payment of RM3,000 from 5 members. It is the club'spolicy to allocate life membership fees to Incomeand Expenditure account over a 15-year period.

REQUIRED:Prepare a life membership account for the yearended 31 December 2004.


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Life Membership Account

Income andExpenditure

account

1,000 Receipts andPayment account

15,000

Ending balance(advance)

14,000

-----

15,000-----

-----

15,000-----


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Some clubs, societies, and associations may run acaf or restaurant for the convenience of itsmembers on a permanent basis with the intention ofmaking profit.

Thus, the club would need to prepare a separateincome statement to determine whether a profit orloss has been made from such activities.


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Donations received are usually shown as incomein the year that they are received. The followingjournal entry is recorded:

Debit Receipts and Payments AccountXX Credit Income and ExpenditureAccount XX

However, if the donation is stated for capitalpurposes, the donation should be shown in theBalance Sheet as a liability. For instance;donation of furniture by public.


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Paid by new member once in alifetime in addition to themembership fee for that year.

It is paid by the member inthe year that they join intothe clubs.

The receipts of the fees will

be reported as income in theyear that they are received.


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The balance sheet of a non-profit making organization issimilar to that of a trading concern except for two areas:

(i) Accumulated Fund

In a non-trading concern, the term Accumulated Fund is

used instead of Capital. In a sole trader or partnership:

Capital + Liabilities = Assets


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In a non-profit making organization:

Surplus of income over expenditure (incomeis greater than expenditure) will increase theaccumulated fund, and the excess of

expenditure over income (expenditure isgreater than income) will decrease theaccumulated fund.

Accumulated Fund + Liabilities = Assets


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Assets and liabilities of a club on 1 January 2004 are as follows:

RM RM

Assets: Liabilities:

Building 30,000Bank loan 5,000

Office equipment 3,600 Rental payable 200

Fixtures & fittings 3,400Wages payable 150

Furniture 2,500

Cash at bank 1,200

Stationery stock 120

Locker 50

REQUIRED:

Calculate the accumulated fund of the club as at 1 January 2004.


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(ii) Profit/Loss

The profit is referred to a surplus of income over

expenditure, whereby the loss is referred to as

the excess of expenditure over income. The profit or loss of the non-trading concerns will

be treated the same way as in the BalanceSheet

of a profit making organisation.


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End of Chapter 7End of Chapter 7

club and society

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