1. Income and Expenditure account

2. Introduction
Non-profit making organizations such as clubs, societies and associations usually do not have a professional and full-time accountant, the preparation of final accounts for these organization is quite different from before.

3. Accounting terms in non-profit making organizations
Terms used
Corresponding terms in commercial business
Accumulated fund
Capital
Receipts and payments account
Cash book
Income and expenditure account
Profit and loss account
Surplus of income over expenditure
Net profit
Deficit of expenditure over income
Net loss

4. Receipts and payment account
It is summary of bank and cash transactions
Receipt and payment account for the year ended 31 Dec XXXX
Receipts $
Bank balance 1.1XX X
Cash balance 1.1.XX X
Membership fees X
Sales of fixture X
Receipts from tea or drink X X
Payments $
Sports stadium expenses X
Wages X
Purchase of tea and drink X
Sundry expenses X
Bank balance XX X
Cash balance XX X X

5. Preparation of final accounts
Bar trading account – to compute the bar profit (one of the income of non-profit making organization and include in I&E)
Income and expenditure account (I&E) – to compute the surplus or deficit of the organization for one year
Balance sheet – to show the financial position of the organization

6. Bar Trading Account

7. Bar Trading Account
It may be called Bar Trading and Profit and loss account
Bar sales, bar purchases and expenses related to the bar operation will also be included

8. Bar Trading Account for the year ended XXXX
XXXX Sport club
Bar Trading Account for the year ended XXXX
$ $
Sales (wk1) X
Less : COGS
Opening stock X
Add: Purchases (wk2) X
Less: Closing stock X X
Gross Profit X
Less: Expense
Barmen wages (wk3) X
Barmen commissions X
Bar expenses X
Depreciation of Bar equipment X X
Net profit to I&E X
Expenses related bar trading only

9. wk1
Total Debtors
Bal b/f X Cash X
Sales (bal.fig.) X Bal c/f X
X X
wk2
Total Creditors
Bank X Bal b/f X
Bal c/f X Purchases (bal. Fig.) X
X X
wk3
Expense/income incurred = cash paid/received + prepaid last
year – accrued last year – prepaid
this year + accrued this year

10. Income and Expenditure Account

11. Income and Expenditure Account
XXXX Sport Club
Income and Expenditure account for the year ended XXXX
Expenditure
Income

12. Income and Expenditure account for the year ended XXXX
XXXX Sport Club
Income and Expenditure account for the year ended XXXX
$ $
Income
Income received X
Subscriptions – Annual subscriptions X
- Life membership fees X
- Joining fees/Entrance fees X
Profit on fund raising activities
( Related Proceeds – Related Expenditure ) X
Profit on disposal X
Donations/Subsidies received X X
Expenditure
Expenses incurred X

13. Subscriptions/bad debt written off X Loss on fund raising activities
$ $
Subscriptions/bad debt written off X
Loss on fund raising activities
(Expenditure- proceed) X
Loss on disposal X
Depreciation X
Bar loss (from bar trading a/c) X X
Surplus/ (deficit) X

14. Balance Sheet

15. Balance Sheet as at 31 Dec XXXX
Cost Dep Net
$ $ $
Fixed Assets
Plant & Machinery X X X
M.V X X X
X X X
Current Assets
Bar Stock X
Subscription in arrears X
Prepayment X
Bank X
Cash X X
Less:Current Liabilities
Creditors – Bar purchases X
Subscription in advance X
Accrued expenses X
Working Capital X

16. $ $ $
Accumulated Fund
Balance as at opening date X
Add/Less: Surplus/(Deficit) of I&E X
Add :Life membership fees (when life
members die) X
: Material donations/legacies received X X
Life Membership Fund X
Entrance Fees/Joining Fees X
Other Fund (e.g. Training /Building Fund) X
Long-term Liabilities X

17. Fund Raising Activities
The profit or loss on the fund raising activities must be computed before transferring to income and expenditure account
Example
Receipt and payment account
Receipts
Proceeds of dance party
Receipts from refreshment 5000
Payments
Printing of dance party tickets
Purchase of refreshments
Sundry expenses of dance party 1020
Additional information:
The opening stock of refreshments was valued at $3200 and the
closing stock of refreshments was valued at $2400

18. Income and expenditure Income
Ans:
Income and expenditure
Income
Profit from dance party
( )
Expenditure
Loss from the sale of refreshment
( )
The related revenue and expense are group together
to compute profit or loss on some activities
Back

19. Donations Donations/Subsidies received Ordinary donations/subsidies
Large donations/legacies
Dr Bank
Cr Donations/Subsidies
Dr Donations/subsidies
Cr Income and expenditure
With the amount received
Transferring to income and expenditure
For general purposes Dr Bank
Cr Accumulated fund
For specific purposes Dr Bank
Cr special fund(e.g. training fund,
Building fund)

20. Donations to other charities
For general purposes
Dr Donation to XXX
Cr Bank
For special purposes
Dr Income and Expenditure
Cr Donation to XXX
With the amount paid
Transferring to I&E as
an expense

21. Subscriptions Annual Subscription Life membership fund
Entrance fees/joining fees

22. Annual Subscriptions Example 1
Receipt and Payments account for the year ended 31 Dec 1996
Receipts
Subscriptions from members for
Additional information:
Subscription in arrears at 31 Dec 96 = $132
Subscription in advance at 1 Jan 96 =$60

23. Ans:
Income and Expenditure account for the year ended 31 Dec 1996
Income $
Subscriptions ( )
Subscription= Cash received from members+Opening
prepayment-opening accrued + closing accrued-
closing prepaid

24. Example 2 Receipt and Payments account for the year ended 31 Dec 1996
Receipts
Subscriptions from members for
Additional information:
1 Jan Dec 1996
Subscription in arrear $ $132
Subscription in advance $ $80
2. The club has a policy of writing off any subscription that
are outstanding for more than one year

25. Ans:
Income and Expenditure account for the year ended 31 Dec 1996
Income $ $
Subscriptions ( )
Expenditure
Subscription written off ( )

26. Example 3 The financial year end of the club is 31 December, but
The subscriptions are payable in advance on 1 October each
Year. The subscriptions received on 1 October 1995 were
$8000 and 1 October 1996 were $ , without any
subscription in arrears.

27. Ans:
Income and Expenditure account for the year ended 31 Dec 1996
Income $
Subscriptions
from 1 Jan-30Sept96 ($8000*9/12)
from 1 Oct-31 Dec96 ($12000*3/12)
Back

28. Life membership fund
Life membership fees are income earned over a long period, and therefore, they should not be treated as income in one year.
Usually a life membership fund would be set up, part of it would be written off in each year as income.

29. Several points be noted
A life membership fund can be written off over:
The number of years of annual subscriptions purchased
The estimated average life of life members
Dr Bank
Cr Life membership fund
With the amount of the life membership fees received
Dr Life membership fund
Cr Income and expenditure
With the part of life membership fees to be recognized as income in the current year

30. Example 4 From 1 January 1995, the club began to recruit life members.
On joining the club each life member has to pay a life
membership fee of $4000.
As at 31 December 1995, 20 people had been admitted as
life members.
In 1996, 5 people joined the club as life members
The life membership fee is to be recognized as income evenly
over 10 years.

31. Ans:
Life membership fund
$ $
Dec 31 I&E
(80000*1/10)
Dec 31 cash (20*$4000) 80000
Dec 31 Bal c/d
Income and Expenditure account for the year ended 31 Dec
Income
1995 $
8000
Subscriptions
Balance Sheet (Extract)
1995 $
Life membership subscription
72000

32. Ans: Life membership fund 1995 $ 1995 $ Dec 31 I&E (80000*1/10) 8000
$ $
Dec 31 I&E
(80000*1/10)
Dec 31 cash (20*$4000) 80000
Dec 31 Bal c/d
$ $
Jan 1 Bal b/d
Dec 31 I&E
(20000*1/10)+
(80000*1/10)
Dec 31 Cash (5*4000)
Dec 31 Bal c/d

33. Income and Expenditure account for the year ended 31 Dec
1995 $
1996 $
8000
10000
Subscriptions
Balance Sheet (Extract)
1995 $
1996 $
Life membership subscription
72000
82000

34. Life membership fund can be transferred directly to the accumulated fund when an individual life member dies
Dr Bank
Cr Life membership fund
With the amount of the life membership fees received
Dr Life membership fund
Cr Accumulated fund
With the part of life membership fund written off to the accumulated fund when a members dies

35. Example 5 The life membership fund was $8000 as at 1 January1996.
In 1996, two people joined the club as life members.
During the year 1996, three life members died.
It is the club’s policy to transfer the life membership fund of
$400 each directly to the accumulated fund when life members
die.

36. Ans:
Life membership fund
$ $
Jan 1 Bal b/d
Dec 31 Accumulated
fund (3*$400) 1200
Dec 31 Cash (2*400)
Dec 31 Bal c/d
(19*$400)
Back

37. Entrance fees/joining fees
Entrance /joining fees can be included as income in the year that they are received, or written off over the number of years determined by the clubs

38. Write off entrance fees wholly in the year they are received
Dr Bank
Cr Entrance fees/joining fees
With the amount received
Dr Entrance fees/joining fees
Cr I&E
Transferring wholly to the I&E as income
Write off entrance fees over a number of years
Cr entrance fees/joining fees
Transferring the portion to be recognized as income

39. Example 6 The balance of the entrance fees as at 31 December 1995 was
made up of:
Year of joining Balance
$1000
$1500
$3000
On joining the club, each new member has to pay an entrance
fee of $500
The entrance fee is to be recognized as income evenly over four
years
During the year of 1996, 10 new members had been admitted

40. Income and Expenditure account for the year ended 31 Dec
1996 $
Entrance Fees ( *1/2+3000*1/3+500*10*1/4) 4000
Balance Sheet (Extract) $
Accumulated fund X
Add surplus of I&E X X
Entrance fees (1500*1/2+3000*2/3+500*10*3/4)