IGCSE Accounting 0452 - 5.4 Clubs and Societies

Objective: Prepare Income and Expenditure Accounts and Statements of Financial Position

Introduction

Clubs and societies are non-profit organizations that often rely on membership fees and fundraising to finance their activities. Accurate record-keeping is crucial for managing their finances and demonstrating financial responsibility. This section covers the preparation of key financial statements: the Income and Expenditure Account and the Statement of Financial Position.

1. Income and Expenditure Account

The Income and Expenditure Account (IEA) shows a club or society's income and expenditure over a specific period (e.g., a year). It determines whether the club made a profit or a loss.

1.1 Structure of the IEA

The IEA follows a standard format:

• Income: Money received by the club (e.g., membership fees, fundraising income, grants).
• Expenditure: Money spent by the club (e.g., room hire, equipment, printing, postage).

1.2 Example IEA

Consider the following example for the 'St. Michael's Debating Society' for the year ended 31st December 2023:

Item	Amount (£)
Membership Fees	$1,200
Fundraising - Bake Sale	$350
Room Hire	$600
Equipment Purchase	$250
Printing & Postage	$100
Total Income	$2,500
Total Expenditure	$1,200
Net Profit	$1,300

1.3 Calculating Net Profit/Loss

Net Profit = Total Income - Total Expenditure

If the result is negative, it represents a Net Loss.

2. Statement of Financial Position

The Statement of Financial Position (SoFP), also known as the Balance Sheet, shows a club or society's assets, liabilities, and capital at a specific point in time (e.g., 31st December 2023).

2.1 Key Terms

• Assets: Things the club owns (e.g., bank account balance, equipment).
• Liabilities: Amounts the club owes to others (e.g., loans, outstanding bills).
• Capital: The difference between assets and liabilities (Equity). Represents the club's net worth.

2.2 Structure of the SoFP

The SoFP follows the accounting equation:

Assets = Liabilities + Capital

2.3 Example Statement of Financial Position

Here's an example for 'St. Michael's Debating Society' as of 31st December 2023:

Assets (£)	Amount
Bank Account	$1,800
Equipment	$300
Total Assets	$2,100
Liabilities (£)	Amount
Outstanding Bills	$100
Total Liabilities	$100
Capital (£)	Amount
Capital	$2,000
Total	$2,200

Note: $2,100 (Total Assets) = $100 (Total Liabilities) + $2,000 (Capital)

3. Relationship between IEA and SoFP

The IEA and SoFP are linked. The net profit or loss from the IEA is added to or subtracted from the capital balance in the SoFP to update the club's financial position.

For example, if the Debating Society made a net profit of $1,300, the capital balance on the SoFP would increase by $1,300.

4. Important Considerations

• Accurate Record Keeping: Maintain detailed records of all income and expenditure.
• Regular Review: Review financial statements regularly to identify trends and potential problems.
• Transparency: Be transparent with members about the club's financial situation.
• Fundraising: Document all fundraising activities and associated income.
• Grants: Record any grants received and the conditions attached to them.

Practice Questions

1. Prepare an Income and Expenditure Account for a school drama club for the year ended 31st March 2024, with the following information: Membership fees: $800, Ticket sales: $500, Room hire: $300, Cost of costumes: $200, Printing: $50.

2. Prepare a Statement of Financial Position for a chess club as of 31st December 2024, with the following information: Bank balance: $1,200, Equipment: $400, Outstanding bills: $80, Capital: $1,600.