Club Accounts

Club Accounts

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Key Learning Outcomes


  • Know the layout of the Statement of Accumulated Fund, Income and Expenditure Account and Balance Sheet.
  • Know the exact location of each item in the Balance Sheet.
  • Learn the theory which could be examined in this topic.

Introduction


Club Accounts is one of a number of questions which could be asked in either Section 1 or Section 2.

When asked in Section 1 the question is worth 60 marks (15%) and should take 27 minutes maximum.

When asked in Section 2 the question is worth 100 marks (25%) and should take 45 minutes maximum.

Club Accounts has appeared in Section 1 of the paper in the following years:  98, 08, 13, 16.

Club Accounts has appeared in Section 2 of the paper in the following years:  02, 04, 11.

The years stated above are listed solely to assist revision ‒ See Practical Matters 5.

The choice in both Section 1 and Section 2 is to answer two questions from the three asked.

Practical Matters:

(1)   Always do the question in the same way ‒ this will increase speed and confidence.
(2)   Know the maximum time allowed for the question (see Introduction above).
(3)   Use only one colour in the solution ‒ use of colour slows down the work.
(4)   Write the solution on the left and right hand side of a double page.
(5)   Do not try to predict the examination paper ‒ study all possible questions in all sections.

 

Sample Exam Q&A


 Question

Included among the assets and liabilities of the Links Golf Club on 1/1/2017 were the following:

Clubhouse and course €765,000, equipment at cost €45,000, bar stock €11,800, bar debtors €940, bar creditors €3,200, catering stock €500, life membership €30,000, levy reserve fund €35,000,  wages prepaid €700, subscriptions due €900, investment interest due €400.

The club treasurer has supplied the following account of the club’s activities during the year ended 31/12/2017

001

You are given the following information and instructions:

(i)    Bar stock at 31/12/2017 was €15,400.

(ii)   Equipment owned on 31/12/2017 is to be depreciated at the rate of 20% of cost.

(iii)  Clubhouse and course to be depreciated by 2%.

(iv)  Bar debtors and creditors on 31/12/2017 were €850 and €4,600 respectively.

(v)   Subscriptions include:

  1.   Two life memberships, bringing total life membership to eight.
  2.   Subscriptions for 2018 amounting to €1,900.
  3.   Levy for 2017 of €100 each on all 350 members.
  4.   Levy for 2016 of €100 each due from 13 members.

(vi)    Investment interest due on 31/12/2017 was €700.

(vii)  The club has decided that life membership was to be credited to income over a ten year period commencing in 2017.

You are required to:

(a)   Show the club’s accumulated fund (capital) on 1/1/2017.

(b)   Show the income and expenditure account for the year ending 31/12/2017.

(c)    Show the club’s balance sheet on 31/12/2017.

(d)
(i) State and explain three limitations of a receipts and payments account.
(ii) The club is considering course improvements at a cost of €110,000. What advice would you give to the Treasurer of the club?

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Sample Answers (a) – Show the club’s accumulated fund (capital) on 1/1/2017

002

 

Sample Answers (b) – Show the income and expenditure account for the year ending 31/12/2017

003

 

Sample Answers (c) – Show the club’s balance sheet on 31/12/2017

004

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Sample Answers (d) (i) – State and explain three limitations of a receipts and payments account

(1)  Does not show if enough funds are being raised to cover costs.
(2)  Does not show amounts due at the end of the year.
(3)  Only shows the cash increase/decrease but there could be amounts due.
(4)  Does not show losses such as depreciation.
(5)  Does not show if the bar or catering are profitable.
(6)  Does not distinguish between receipts for this year and other years.

 

Sample Answers (d) (ii) – The club is considering course improvements at a cost of €110,000. What advice would you give to the Treasurer of the club?

005

I would advise the treasurer to carry out the course improvements because:

(1)  The shortfall €58,150 can be borrowed and repaid within two years if the excess income remains at €31,310 but entrance fees €15,000 and annual sponsorship €19,500 are not  guaranteed in the future.

(2)  The financial position is strong ‒ the bank balance increased from €37,800 to €42,050 having paid off €64,800 and although the equipment grant of €20,000 is a capital receipt, the purchase of equipment €19,000 is not an annual expense.

(3) Course improvements will increase membership leading to excess income, usage of the bar and catering increasing also.

Workings

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Student Activity 1

 

Q1 State where each of the following is shown in the accounts:

(a) Life membership 1/1
(b) Subscriptions received in advance 1/1
(c) Subscriptions due 1/1
(d) Investment interest due 1/1
(e) Levy reserve fund 1/1
(f) Bank balance (cr) 1/1
(g) Entrance fees
(h) Annual sponsorship
(i) Equipment grant
(j) Prize bonds
(k) Transfer to building society
(l) Cheque received dishonoured
(m) Cheque received dishonoured not subsequently recovered
(n) Life membership 31/12
(o) Levy reserve fund 31/12

Q2 Explain each of the following terms and state where each is shown in the accounts:

(a) Levy.
(b) Life Membership.
(c) Entrance Fees.

Q3 Explain with the use of an example what is meant by a Special Purpose Profit & Loss Account.
Q4 Advise the treasurer of the club on whether the levy scheme in the question above should be continued. The levy scheme aims to fund an extension to the clubhouse costing €175,000. Use figures from this question to support your answer.
Q5 State what other financial advice you would give the treasurer. Use figures from this question to support your answer
Q6 To fund the course improvements of €110,000 the treasurer has proposed that another levy of €105 be introduced for three years. As an ordinary member, what arguments would you make against this proposal? Use figures from this question to support your answer
Q7 Indicate the points that you, as treasurer, might make if the members at the AGM of the club proposed to reduce the annual subscription by 20%. Use figures from this question to support your answer.

Student Activity 1 Answers


You can download/view the answers to the above questions here