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Accounting For Clubs & Societies

Learning Outcomes: Understand the concept of clubs & societies Know the accounting requirements of a club

and societies. Able to prepare financial statements for club

and societies

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Societies Act 1966

Clubs and societies are non-business entity registered under the Societies Act 1966.

The purpose is not for profit but to promote and cater for the members’ interests and welfare.

Also provide service to clubs’ members. E.g. sports clubs, social clubs, staff associations.

Introduction

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Comparison between businesses and clubs/societiesBusinesses Clubs and Societies

Set up to earn profit by selling goods and services

To promotes activities of interests to its members

Financed by owners’ equity Financed by monthly or yearly subscriptions from members

Money received and paid are recorded in cash book

Money received/paid are recorded in receipts and payments accounts

Trading account:Sales revenue – cost of sales

Trading account (e.g. canteen):Trading revenue – trading expenses

Revenues: Sales or fees received

Income: Subscriptions from members

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Cont.

Businesses Clubs and Societies

Profit and Loss account= profit/loss

Income and expenditure account= surplus/deficit

Balance sheet:Assets = Owners’ Equity + Liabilities

Balance sheet:Assets = Accumulated fund + Liabilities

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Sources of Income

Businesses Clubs and Societies

Sale of goods Subscriptions

Receipts from services Entrance fees

Rent received Profit from sale of refreshments

Discount received Profit from activities

Interest received Interest received

Profits on disposal Donations

Expenditures: Rental of club house Purchases of newspapers and magazines Purchases of sports equipment Honorarium Workshops and trainings Visits Expenses for meetings

Cont.

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Differences in TermBusinesses Clubs /Societies Comment

Profit & Loss Account

Income & expenditure These differences reflect the fact that clubs & societies are not profit-oriented

Cash account Receipts & Payment a/c Same as above

Net profit/Loss Surplus/Deficit If using accrual basis, apply the treatment as businesses

Capital Accumulated fund Capital does not exist in club/societies. If a member resigns, no right to reclaim fee

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Subscriptions are paid by members as charges for using the facilities of a club or society for a particular period of time (usually in yearly basis).

Subscriptions fees: Entrance fee Annual fee Tournament fee

In order to post it to the Income and Expenditure accounts, adjustments have to be made to the subscription. That is, subscription only pertaining to that particular year is recorded in Income/Expenditure accounts.

Subscription accounts

Is a summary of the cashbook for the period under review.

A summary of cash and cheques received and paid. It does not use accrual basis in accounting. Receipts are recorded at debit side and payments are

recorded at credit side of the account. If at the end of the accounting period, balances in

debit side indicate as cash in hand (B/S) and balances in credit side indicate overdraft (B/S).

Receipt & Payment Account

R/P accounts maybe suitable for very small clubs and societies with mainly have cash and bank balances.

Thus, for larger clubs and societies usually prepare and income and expenditure accounts.

Cont.

The preparation of the account is similar to P&L Account for businesses.

Accrual basis – year end adjustments are necessary. Surplus = Profit Deficit = Loss

Income & Expenditure Account

It is necessary if the club runs trading operation such as canteen.

The profit/loss obtained from the trading is posted to Income & Expenditure Account.

Relevant information: Opening and closing stocks Purchases (Cash and credit) Sales (Cash and credit) Expenses for operating the trade (e.g. canteen)

Trading Account

To record all assets, liabilities and accumulated funds. The presentation is similar as BS for businesses except

for the owners’ equity. Owners’ equity = Accumulated fund

Assets = Accumulated funds + Liabilities

Balance Sheet