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Non-Profit Making Organisations
Accumulated Fund and the Balance Sheet
We already know that the capital account of a non-profit making organisation is called the accumulated fund... but where is it? Why haven't we seen one yet? Well, we didn't want to make your life too much of a misery all at once by giving you too much to think about so we saved it until last! More than that, we have put the accumulated fund with our balance sheet explanations... we think it makes sense!
The accumulated fund works in exactly the same way as the capital account:
| Accumulated Fund |
|---|
| Balance b/d | XX |
| ± Surplus/Deficit of income over expenditure | XX |
| Balance c/d | XXX |
By far the best way of sorting it all out is to work through an example although in the first case we won't prepare a full balance sheet.
Worked Example
| Buckingham Sports and Social Club - Receipts and Payments for the year ended 31/08/04 |
|---|
| £ | £ |
| Cash in hand 01/09/03 | 3,000 | Bar purchases | 24,000 |
| Interest | 1,500 | Purchase of equipment | 20,000 |
| Subscriptions | 36,000 | General expenses | 26,000 |
| Bar sales | 50,000 | Competition costs | 3,000 |
| Competition receipts | 2,000 | Cash balance 31/08/04 | 19,500 |
| | 92,500 | | 92,500 |
| Other Balances as at 01/09/03 |
|---|
| Clubhouse and land | 100,000 |
| Equipment | 25,000 |
| Bar stock | 4,000 |
| Investments | 20,000 |
| General expenses owing | 500 |
| Subscriptions due | 1,000 |
| |
| Additional information as at 31/08/04 |
|---|
| Bar stock | 6,000 |
| Bar creditors | 400 |
| General expenses prepaid | 300 |
| Subscriptions prepaid | 900 |
| Equipment held on 31/08/03 to be depreciated by | 20% |
Required
- Prepare a statement showing the club's accumulated fund at 01/09/03
- Prepare the club's income and expenditure account for the year ended 31/08/04
- Prepare the club's balance sheet as at 31/08/04
Worked Example Solution
a. The club's accumulated fund at 01/09/03:
This first part is probably very similar to many questions you tried when you first learned the accounting equation:
assets = liabilities + capital
Strictly speaking, we need to change that for non-profit making organisations to be:
assets = liabilities + accumulated fund
Then you would go on to working with this equation, including the evaluation of the capital balance at the start of the year given a list of assets and liabilities. What you are about to see is exactly the same as that.
| Buckingham Sports and Social Club Accumulated Fund at 01/09/03 |
|---|
| Assets | Liabilities + Accumulated Fund |
|---|
| Cash in hand 01/09/03 | 3,000 | General expenses owing | 500 |
| Club house and land | 100,000 | Balance c/d | 152,500 |
| Equipment | 25,000 | |
| Bar stock | 4,000 | |
| Investments | 20,000 | |
| Subscriptions due | 1,000 | |
| | 153,000 | | 153,000 |
b. Prepare the club's income and expenditure account for the year ended 31/08/04:
The IEA that follows is again given in vertical format and where possible we have just inserted the final surplus or deficit figure rather than putting all of the detail in. For example, we have opened an account for subscriptions and just shown the final figure on that account in the IEA. The same applies to the bar and to general expenses. This is a very good and efficient way of working, by the way!
| Buckingham Sports and Social Club Income and Expenditure Account for the year ended 31/08/04 |
|---|
| | Note | |
|---|
| | Subscriptions for the year | 1 | | 34,100 |
| | Surplus on bar a/c | 2,3 | | 27,600 |
| | Interest | | 1,500 |
| | Gross surplus before deficit on competitions | | 63,200 |
| | Deficit on competitions | 4 | | 1,000 |
| | | 62,200 |
| less | |
| | General expenses for the year | 5 | 25,200 | |
| | Depreciation of equipment | 6 | 9,000 | 34,200 |
| | | 28,000 |
Here are all of the notes to explain the adjustments we have made for the IEA.
| Notes |
|---|
| 1 | Dr | Cr |
| | Balance b/d | 1,000 | |
| | Subscriptions | | 36,000 |
| | Prepayments c/d | 900 | |
| | IEA subscriptions for the year | 34,100 | |
| | 36,000 | 36,000 |
| 2 | |
| | Bar sales | | 50,000 |
| | Bar stock as at 31/08/03 | 4,000 | |
| | Bar purchases for the year | 24,400 | |
| | Bar stock | | 6,000 |
| | IEA surplus on bar a/c | 27,600 | |
| | 56,000 | 56,000 |
| 3 | |
| | Bar purchases | 24,000 | |
| | Bar creditors c/d | 400 | |
| | Bar purchases for the year | | 24,400 |
| | 24,400 | 24,400 |
| 4 | |
| | Competition receipts | | 2,000 |
| | Competition costs | 3,000 | |
| | IEA deficit on competitions | | 1,000 |
| | 3,000 | 3,000 |
| 5 | |
| | General expenses owing at 01/09/03 | | 500 |
| | General expenses | 26,000 | |
| | General expenses prepaid c/d | | 300 |
| | IEA general expenses for the year | | 25,200 |
| | 26,000 | 26,000 |
| 6 | |
| | Equipment as at 31/08/03 | 25,000 | |
| | Purchase of equipment | 20,000 | |
| | Depreciation | | 9,000 |
| | Balance c/d | | 36,000 |
| | 45,000 | 45,000 |
c. Prepare the club's balance sheet as at 31/08/04:
Finally, the balance sheet - and it balances!
| Buckingham Sports and Social Club Balance Sheet as at 31/08/04 |
|---|
| |
| Clubhouse and land | | 100,000 |
| Equipment | | 36,000 |
| Investments | | 20,000 |
| | 156,000 |
| |
| Bar stock | | 6,000 | |
| General expenses prepaid | | 300 | |
| Cash balance 31/08/03 | | 19,500 | 25,800 |
| Total assets | | £181,800 |
| |
| Accumulated Fund b/d | | 152,500 | |
| Net Surplus carried forward to accumulated fund | | 28,000 | |
| Accumulated Fund b/d | | 180,500 | |
| |
| Bar creditors | 400 | |
| Subscription prepayments | 900 | 1,300 | |
| | £181,800 |
Even though that isn't an especially difficult question, it does take time to work through it. However, any good bookkeeper will have learned to be methodical, logical and careful and it is that approach that will help you to succeed with such questions.
Why not try another, very similar question to the Buckingham question now? Go on, you know you want to! Here it is.
For You To Do 8
|
| £ | £ |
| Cash in hand 01/01/04 | 2,961 | Bar purchases | 38,546 |
| Interest | 1,399 | Purchase of equipment | 19,038 |
| Subscriptions | 35,176 | General expenses | 25,686 |
| Bar sales | 72,704 | Competition costs | 3,992 |
| Competition receipts | 2,216 | Cash balance 31/12/04 | 27,194 |
| | 114,456 | | 114,456 |
|
| Land and buildings | 120,885 |
| Machinery and Equipment | 23,420 |
| Bar stock | 4,172 |
| Investments | 24,981 |
| General expenses owing | 641 |
| Subscriptions due | 1,433 |
|
| Bar stock | 2,648 |
| Bar creditors | 281 |
| General expenses prepaid | 274 |
| Subscriptions prepaid | 1,596 |
| Machinery and Equipment held on 31/8/2003 to be depreciated by | 12% |
Required:
- Prepare a statement showing the club's accumulated fund at 01/01/04
- Prepare the club's income and expenditure account for the year ended 31/12/04
- Prepare the club's balance sheet as at 31/12/04
Now take a look at the solution...
For You To Do 9
Note: this is a complex question that calls on your bookkeeping and accounting for clubs and societies skills and there is no need to prepare a balance sheet.
The Balance Sheet of the Midlothian Sports Club as at 31 December 2003 showed the following:
| Subscriptions paid in advance | 310 |
| Subscriptions in arrear | 24 |
| Bar stocks at cost | 540 |
| Bar creditors | 173 |
| Balance at bank and cash in hand | 1,437 |
| Furniture and fittings | 3,110 |
The treasurer keeps a receipts and payments book and the totals for the year ended 31 December 2004 are as follows:
| Subscriptions | 5,110 |
| Bar sales | 5,716 |
| Sales of dance tickets | 2,176 |
| Dance expenses | 749 |
| Rent and rates of premises | 2,200 |
| Lighting and heating | 1,420 |
| Barperson's wages | 2,500 |
| Steward's salary | 5,000 |
| Collections made on behalf of charities | 2,650 |
| Distributions to outside charities | 2,600 |
| Purchase of new furniture | 1,460 |
| Disposal of old furniture | 150 |
| Payments for bar purchases | 2,610 |
The following information as at 31 December 2004 is also vital:
| Subscriptions in arrears | 40 |
| Subscriptions in advance | 410 |
| Bar stocks at cost | 470 |
| Bar creditors | 190 |
| Rent unpaid | 200 |
| Book value of furniture disposed of | 270 |
Depreciation of furniture for the year at 5% of book value on 31 December 2003.
Required:
- Prepare an analysed Receipts and Payments Account for the year ended 31 December 2004.
- Prepare an Income and Expenditure Account for the year ended 31 December 2004. The Income and Expenditure Account should show clearly the profit or loss on the various activities.
Notes:
- A Balance Sheet is not required.
- You need to decide where the Steward spends most of his/her time.
- Think carefully about the collections and disposals made on behalf of charities as far as the IEA is concerned.
Now take a look at the solution...
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