Common Mistakes

Common Mistakes: Accounting for Clubs and Societies

This chapter often confuses students because several accounts look almost alike. This list of common mistakes helps you avoid the errors that most often cost marks in the examination.

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Confusing Receipts and Payments with Income and Expenditure

Mistake: putting the opening and closing cash and bank balances into the Income and Expenditure Account. Avoid: cash and bank balances belong only in the Receipts and Payments Account (which replaces the Cash Book) and in the Statement of Financial Position; they are neither income nor expenditure.
Mistake: recording the full cost of a capital purchase (e.g. sports equipment, furniture) as an expense in the Income and Expenditure Account. Avoid: capital expenditure is shown as a non-current asset in the Statement of Financial Position; only the current-year depreciation is charged as revenue expenditure.
Mistake: transferring the full cash figure from Receipts and Payments straight into Income and Expenditure without adjusting for amounts owing or prepaid. Avoid: Income and Expenditure uses the accrual basis, so add closing accruals/receivables and remove prepayments/advances so only the current-year amount is recognised. This is why the figures in the two accounts often differ.

Members' Subscription Account

Mistake: swapping Subscription in Arrears (Yuran Belum Terima) with Subscription in Advance (Yuran Belum Terperoleh). Avoid: arrears are money still owed to the club (an asset), while advance is money received for a future year (a liability); label each clearly before posting.
Mistake: placing the opening balances on the wrong side. Avoid: opening arrears (an asset) start on the debit side as balance b/d, while opening advance (a liability) starts on the credit side as balance b/d; the closing balances go on the opposite side.
Mistake: leaving Bad Subscriptions (Yuran Lapuk) inside the arrears figure or carrying them forward. Avoid: subscriptions from a previous year now judged uncollectable are written off on the credit side of the Subscription Account so that only recoverable arrears remain in the account.

Terminology and Classifying Capital vs Revenue

Mistake: writing 'net profit' and 'net loss' for a club. Avoid: a non-profit body reports a surplus (lebihan) when income exceeds expenditure, and a deficit (kurangan) when expenditure exceeds income.
Mistake: treating capital income (e.g. a donation specifically for a building fund, or the capitalised portion of life membership) as revenue income in the Income and Expenditure Account. Avoid: capital income is added to the Accumulated Fund or shown as a special fund in the Statement of Financial Position, not as income of the year.
Mistake: classifying a repair as capital expenditure, or a building extension as revenue expenditure. Avoid: revenue expenditure covers day-to-day running costs (repairs, wages, utilities) and is charged to Income and Expenditure; capital expenditure buys or improves an asset and goes to the Statement of Financial Position.

Trading Account and Periodic Activities

Mistake: recording the gross takings of a dinner, bar or canteen as income and scattering its costs as separate expenses in the Income and Expenditure Account. Avoid: prepare a Trading Account for each profit-making activity and transfer only the profit or loss of that activity to Income and Expenditure.
Mistake: forgetting to reduce bar/canteen purchases by the closing inventory. Avoid: the activity's closing inventory is deducted in the Trading Account and shown as a current asset; otherwise the activity's profit is understated.
Mistake: thinking a club may not earn any profit at all, or worrying that profit-making activities contradict its purpose. Avoid: a club may run profit-making activities as long as the surplus funds its non-profit objectives; the profit motive must not become the club's main aim under the Societies Act 1966.

Accumulated Fund and Statement of Financial Position

Members' Subscription Account

Details	Debit (RM)	Details	Credit (RM)
Balance b/d (Subscription in arrears)	300	Balance b/d (Subscription in advance)	200
Income and Expenditure Account	5,250	Bank (Subscriptions received)	5,000
Balance c/d (Subscription in advance)	150	Bad subscriptions (written off)	100
		Balance c/d (Subscription in arrears)	400
	5,700		5,700

Sample Members' Subscription Account (figures for illustration). Subscription in arrears = asset (balance b/d on the debit side); subscription in advance = liability (balance b/d on the credit side); bad subscriptions are written off on the credit side.

Why is the subscription in the Receipts and Payments Account different from the subscription in the Income and Expenditure Account?

Receipts and Payments records the cash received during the year, whichever year it belongs to; Income and Expenditure records only the subscription earned for the current year, that is, after adding arrears and removing advances and bad subscriptions.

Which items in Receipts and Payments are NOT recorded in Income and Expenditure?

The opening and closing cash and bank balances, the purchase and sale of non-current assets (capital items), and capital receipts such as amounts for a special fund, because they are not current-year income or expenses.

Is it wrong for a club to earn a profit?

No. A club may organise profit-making activities, but the surplus must support its non-profit objectives; earning profit must not replace the club's main purpose under the Societies Act 1966.

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