Cambridge IGCSE Accounting · 0452
Chapter 5: Preparation of Financial Statements — Part 4
Section 5.5 · Clubs and Societies
Non-profit making organisations, such as sports clubs or youth groups, exist to provide a service or facility for their members rather than to make a profit. You must distinguish between their unique terminology and that of a standard business.
Key Differences in Terminology
| Profit-Making Business | Club or Society |
|---|---|
| Cash Book | Receipts and Payments Account |
| Income Statement | Income and Expenditure Account |
| Net Profit | Surplus (Income > Expenditure) |
| Net Loss | Deficit (Expenditure > Income) |
| Capital | Accumulated Fund |
The Receipts and Payments Account
This is a summary of the Cash Book for the financial period. It records all money received (debit) and all money paid out (credit) on a cash basis.
- Includes both capital receipts (e.g. sale of equipment) and revenue receipts (e.g. subscriptions).
- Limitation: It does not distinguish between capital and revenue items and does not account for accruals or prepayments.
Therefore, a Receipts and Payments Account alone cannot show the true financial performance of the club — the Income and Expenditure Account is required.
Subscriptions in Advance and Arrears
Subscriptions relate to a specific membership period. At the year end, adjust cash received to the amount earned in the period:
| Situation | Income and Expenditure Account | Statement of Financial Position |
|---|---|---|
| Subscriptions in advance (prepaid by members) | Deduct from cash received | Current liability (other payables) |
| Subscriptions in arrears (owed by members) | Add to cash received | Current asset (other receivables) |
Formula: Subscriptions for the year = Cash received + Arrears at end − Arrears at start − Subscriptions received in advance at end + Subscriptions received in advance at start.
The Income and Expenditure Account
Equivalent to the Income Statement of a profit-making firm. Prepared on an accruals basis with adjustments for depreciation, irrecoverable debts, and accruals/prepayments.
If a club runs a bar or restaurant, prepare a separate Trading Account first. Only the profit (or loss) from that activity is transferred to the Income and Expenditure Account as income.
The Accumulated Fund
Since there is no owner, capital is called the Accumulated Fund — the total of past surpluses reinvested in the club.
Calculation: Total Assets − Total Liabilities = Accumulated Fund
Movement: Opening Accumulated Fund + Surplus (or − Deficit) = Closing Accumulated Fund
Worked Example 1: From Receipts and Payments to Income and Expenditure
Riverside Sports Club — year ended 31 December 2025. Cash subscriptions received $18,500. Additional information:
- Subscriptions in arrears: 1 Jan $800; 31 Dec $1,200
- Subscriptions received in advance: 1 Jan $600; 31 Dec $900
- Rent paid $4,800 (covers 12 months to 30 September; 3 months prepaid at year end)
- Depreciation on equipment $1,500
- Bar profit (from trading account) $2,400
Subscriptions for the year:
18,500 + 1,200 − 800 − 900 + 600 = $19,600
Rent for the year: 4,800 × 9/12 = $3,600 (prepaid $1,200 is a current asset)
| Income and Expenditure Account | $ | $ |
|---|---|---|
| Subscriptions | 19,600 | |
| Profit from bar | 2,400 | |
| 22,000 | ||
| Rent | 3,600 | |
| Depreciation | 1,500 | (5,100) |
| Surplus for the year | 16,900 |
Worked Example 2: Accumulated Fund
At 31 December 2025, Riverside Sports Club has: Equipment (net book value) $12,000; Inventory (bar) $800; Subscriptions in arrears $1,200; Prepaid rent $1,200; Bank $3,500; Creditors $600; Subscriptions in advance $900. Opening accumulated fund was $2,100.
Accumulated Fund at 31 December 2025:
Total assets = 12,000 + 800 + 1,200 + 1,200 + 3,500 = $18,700
Total liabilities = 600 + 900 = $1,500
Accumulated Fund = 18,700 − 1,500 = $17,200
Check: Opening accumulated fund $2,100 + Surplus $16,900 (from Example 1) − Asset purchases not in I&E = $17,200. ✓
Exam Traps
- Capital purchases: Do not include the purchase price of equipment in the Income and Expenditure Account — only depreciation is expenditure.
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