Clubs and societies Revision Notes

Receipts and payments accounts record all cash transactions during a period, showing actual cash received and paid out. They include opening and closing cash balances and do not distinguish between income earned and expenses incurred; they simply track cash flow.

Income and expenditure accounts, by contrast, are prepared on an accrual basis. They record income earned and expenses incurred during the accounting period, regardless of whether cash has been received or paid. This provides a measure of the club or society's financial performance over the period.

In summary, receipts and payments accounts focus on cash movements, while income and expenditure accounts focus on the financial result (surplus or deficit) for the period. Receipts and payments accounts are simpler and often used by smaller clubs, whereas income and expenditure accounts provide a more accurate picture of financial health.

• Receipts and payments accounts: cash basis, include opening and closing cash balances, simple record of cash flow.
• Income and expenditure accounts: accrual basis, record income earned and expenses incurred, show surplus or deficit.
• Receipts and payments accounts do not show profit or loss; income and expenditure accounts do.

To prepare a receipts and payments account, list all cash receipts on the debit side and all cash payments on the credit side. Include opening cash and bank balances as the first item on the debit side and closing balances on the credit side to balance the account.

For example, if a club receives £500 in subscriptions and pays £200 for equipment, with an opening cash balance of £100, the receipts and payments account will show:

Debit side: Opening balance £100, Subscriptions £500 (total £600)  - Credit side: Equipment £200, Closing balance £400 (total £600)  This confirms that cash inflows and outflows reconcile correctly.

• List all cash received on debit side, including opening balance.
• List all cash paid on credit side, including closing balance.
• Ensure both sides balance to confirm accuracy.

Clubs often generate revenue from activities such as selling refreshments or collecting subscriptions. These must be accounted for properly.

Subscriptions are usually recorded as income in the income and expenditure account when earned, even if not yet received in cash. For example, if £600 of subscriptions relate to the current year but only £500 is received, the income and expenditure account should show £600 income, and a debtor of £100 is recorded in the statement of financial position.

Refreshments sales are recorded as income when sold. The cost of refreshments sold is recorded as an expense. For example, if refreshments sold generated £300 income and cost £180, the income and expenditure account shows £300 income and £180 expense, resulting in a £120 gross surplus from refreshments.

• Record subscriptions as income when earned, not just when received.
• Include debtors or creditors for subscriptions unpaid or prepaid.
• Record refreshments income and related expenses separately to show gross surplus.

The income and expenditure account summarises all income earned and expenses incurred during the period to calculate the surplus or deficit.

Format: List all income items (subscriptions, refreshments, donations) then all expenses (rent, refreshments cost, utilities). The difference is the surplus (if income > expenses) or deficit (if expenses > income).

The statement of financial position shows the club's assets, liabilities, and accumulated fund at the period end. Assets include cash, debtors, and equipment. Liabilities include creditors and any loans. The accumulated fund represents the net worth and is calculated as:

• Income and expenditure account shows surplus or deficit for the period.
• Statement of financial position lists assets, liabilities, and accumulated fund.
• Accumulated fund = Assets − Liabilities.

Adjustments may be needed for accrued income, prepaid expenses, depreciation, or outstanding liabilities to ensure the income and expenditure account reflects the true financial performance.

For example, if £50 of subscriptions relate to the next year, this is a prepaid income and should be deducted from income for the current year.

The accumulated fund is the club's retained surplus or deficit over time. It is calculated by adding the current period surplus (or subtracting deficit) to the opening accumulated fund:

• Make adjustments for accruals and prepayments to reflect true income and expenses.
• Calculate accumulated fund as opening fund plus surplus (or minus deficit).
• The accumulated fund appears in the statement of financial position as net equity.