Clubs and Societies

Not-for-profit organisations include sports clubs, social clubs, charities, and societies. Their primary aim is to benefit their members (or a wider community) rather than to generate a profit for owners.

Key differences from a trading business:

• There are no owners seeking a profit — there is no capital contributed by one person.
• Instead, members pay subscriptions to fund the organisation.
• The organisation aims to cover its costs; if it receives more than it spends, the excess is called a surplus (not a profit); if it spends more than it receives, the shortfall is a deficit (not a loss).
• There are no drawings because there is no personal capital.
• The net worth of the organisation is called the accumulated fund (not capital).

Financial statements prepared by a club:

1. Receipts and payments account — a simplified cash summary.
2. Income and expenditure account — an accruals-based income statement equivalent.
3. Statement of financial position — shows assets, liabilities, and accumulated fund.

Some clubs also prepare a bar trading account or sports equipment trading account for any trading activities they run.

The receipts and payments account is a straightforward summary of the club's actual cash flows — it records all money received (receipts) and all money paid out (payments) during the period.

Receipts and Payments Account for the year ended 31 December 2026
Dr                                                    Cr
                              $                                    $
Balance b/d (opening cash)  X 000    Wages and salaries        X 000
Subscriptions received      X 000    Rent paid                 X 000
Bar sales                   X 000    Bar purchases             X 000
Entrance fees               X 000    Equipment purchased       X 000
Donations received          X 000    Insurance paid            X 000
                                     Balance c/d (closing cash) X 000
                            ______                              ______
                            X 000                               X 000

Key features:

• It is essentially a cash book summary.
• It includes BOTH revenue items (e.g., subscriptions, bar sales) and CAPITAL items (e.g., equipment purchased, loans received).
• It does NOT apply the accruals concept — only ACTUAL cash flows appear.
• It always shows the opening and closing cash/bank balance.

Limitations:

• It does NOT show whether the club made a surplus or deficit for the period.
• It does NOT match income and expenses to the correct period.
• It does NOT show assets, liabilities, or the accumulated fund.
• Capital expenditure (buying equipment) is mixed in with revenue expenditure.

For these reasons, clubs also prepare an income and expenditure account on an accruals basis.

The income and expenditure (I&E) account is prepared on the accruals basis, making it the true measure of the club's financial performance for the period. It is structured similarly to an income statement:

Income and Expenditure Account for the year ended 31 December 2026
                                         $
Income:
  Subscriptions (see working)           X 000
  Bar trading surplus (from bar account) X 000
  Entrance fees                         X 000
  Donations                             X 000
  Interest received                     X 000
Total income                            X 000
Less: Expenditure:
  Wages and salaries                    X 000
  Rent                                  X 000
  Insurance                             X 000
  Depreciation                          X 000
  [Other named expenses]                X 000
Total expenditure                      (X 000)
Surplus/(Deficit) for the year         X 000

Key differences from the receipts and payments account:

• Revenue items only (capital items such as equipment purchases are excluded).
• Accruals and prepayments are applied.
• Depreciation is included as a charge (non-cash).
• Bar/café income appears as the bar trading surplus (after deducting bar costs), not the gross bar sales.

The surplus is added to the accumulated fund on the SFP; a deficit is deducted.

Subscriptions are the membership fees paid by members. Because different members pay at different times, the accruals concept requires careful adjustment:

Terms to know:

• Subscriptions in arrears (receivable): members who owe their subscription for the CURRENT year but have not yet paid. These are current assets.
• Subscriptions in advance (received in advance): members who have already paid their subscription for NEXT year. These are current liabilities.

Formula for subscription income:

Cash received from subscriptions                 X
Add: Subscriptions in arrears at year end        X   (earned this year, not yet received)
Less: Subscriptions in advance at year end      (X)  (received but belongs to next year)
Less: Subscriptions in arrears at start of year (X)  (received this year but earned last year)
Add: Subscriptions in advance at start of year   X   (belongs to this year, received last year)
Subscription income for the year                 X

SFP treatment:

• Arrears at year end = current asset (other receivables) — members owe the club
• Advance at year end = current liability (other payables/deferred income) — club owes members the service

Example: Cash received: $5 400; Arrears at start: $200; Arrears at end: $300; Advance at start: $150; Advance at end: $100. Subscription income = $5 400 + $300 − $100 − $200 + $150 = $5 550.

The accumulated fund is the equivalent of the capital section for a not-for-profit organisation. It represents the net assets of the club:

Accumulated fund = Total assets − Total liabilities

Opening accumulated fund: If not given, it can be calculated from the opening SFP: Opening accumulated fund = Opening assets − Opening liabilities.

SFP structure for a club:

Statement of Financial Position as at 31 December 2026
                                         $
Non-current assets:
  Equipment (at carrying amount)      X 000
Current assets:
  Bar inventory                       X 000
  Subscriptions in arrears              X 00
  Bank                                X 000
                                      X 000
Current liabilities:
  Subscriptions in advance              X 00
  Accruals                              X 00
                                       (X 00)
Working capital                       X 000
Net assets                            X 000

Accumulated fund
  Opening balance                     X 000
  Add: Surplus for the year           X 000
  Closing accumulated fund            X 000

The closing accumulated fund must equal the net assets. This is the built-in check for the club's SFP.