Club and Society
Transcript of Club and Society
-
7/28/2019 Club and Society
1/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
Accounting forClub andSociety
-
7/28/2019 Club and Society
2/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
Explain the types oforganizationsincluded under cluband society
Prepare thefinancial statementsof the club andsociety
-
7/28/2019 Club and Society
3/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
4/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
5/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
6/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
There are two types of expenditures which are:capital expenditure
revenue expenditure
-
7/28/2019 Club and Society
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.
-
7/28/2019 Club and Society
8/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
9/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
10/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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
-
7/28/2019 Club and Society
11/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
12/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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
-
7/28/2019 Club and Society
13/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
14/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
The possible types of expenditures to be debitedto the Income and Expenditure accounts are: rent for club building,
staff wages,honorarium, and
insurance.
-
7/28/2019 Club and Society
15/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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)
-
7/28/2019 Club and Society
16/32
-
7/28/2019 Club and Society
17/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
18/32Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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
-
7/28/2019 Club and Society
19/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
20/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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
-
7/28/2019 Club and Society
21/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
22/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
23/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
Life Membership Account
Income andExpenditure
account
1,000 Receipts andPayment account
15,000
Ending balance(advance)
14,000
-----
15,000-----
-----
15,000-----
-
7/28/2019 Club and Society
24/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
25/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
26/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
27/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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
-
7/28/2019 Club and Society
28/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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
-
7/28/2019 Club and Society
29/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
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.
-
7/28/2019 Club and Society
30/32
-
7/28/2019 Club and Society
31/32
Ropidah, Haslinda, Aryati, Liana The McGraw-Hill Companies, Inc., 2005
(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.
-
7/28/2019 Club and Society
32/32
End of Chapter 7End of Chapter 7