Practice Questions: Accounting for Clubs and Societies

An effective working order when you practise

• Read the question twice and separate capital items from revenue items first. Purchases of equipment, vehicles or furniture and donations for a special fund (for example a building fund) are capital items; salaries, rent, subscriptions and bank interest are revenue items.
• Follow a fixed sequence: (1) Receipts and Payments Account to track cash flow, (2) Members' Subscription Account to obtain the current-year subscription on an accrual basis, (3) Trading Account for any periodic activity, (4) Income and Expenditure Account, (5) Statement of Financial Position.
• Compute the Accumulated Fund at the start of the year as total assets minus total liabilities on that date. This figure becomes the opening balance in the equity section of the Statement of Financial Position, just like capital for a profit-oriented entity.
• Label every figure as 'received' or 'earned': cash received goes into the Receipts and Payments Account, whereas income earned (accrual basis) goes into the Income and Expenditure Account. This stops you mixing the two bases of accounting.

Common mistakes to avoid

• Placing subscriptions in arrears and subscriptions in advance on the wrong side of the Members' Subscription Account. Remember: the opening arrears balance is a debit, the opening advance balance is a credit, and the closing balances swap sides.
• Putting purchases of fixed assets or special-fund donations into the Income and Expenditure Account. Capital items are not recorded there; they appear in the Statement of Financial Position.
• Forgetting to bring the opening cash/bank balance into the Receipts and Payments Account, or treating its closing balance as the surplus of income. The cash balance is not the surplus; the surplus of income comes from the Income and Expenditure Account.
• Transferring the cash amount of subscriptions (RM received) straight into the Income and Expenditure Account without adjustment. You must first adjust for arrears and advances so that only the current-year subscription is taken.

Practice Questions

1. Question 1

   Question 1 (Members' Subscription Account). Sinar Harmoni Sports Club has the following information for the year ended 31 December 2025: subscriptions in arrears at 1 January RM300; subscriptions in advance at 1 January RM150; subscriptions received during the year RM8,400; subscriptions in arrears at 31 December RM450; subscriptions in advance at 31 December RM200; bad subscriptions written off RM100. Prepare the Members' Subscription Account and determine the subscription transferred to the Income and Expenditure Account.

   Answer

   Refer to the Members' Subscription Account table.

   Debit: Balance b/d (arrears) 300 + Income & Expenditure (current subscription) 8,600 + Balance c/d (advance) 200 = 9,100

   Credit: Balance b/d (advance) 150 + Bank 8,400 + Bad subscriptions 100 + Balance c/d (arrears) 450 = 9,100

   The balancing figure, i.e. the current subscription transferred to the Income and Expenditure Account = RM8,600.

   The bad subscriptions of RM100 are recorded as a separate expense in the Income and Expenditure Account.

2. Question 2

   Question 2 (Concepts). (a) Based on the Societies Act 1966, explain the meaning of a club and society. (b) State three main sources of finance for a club and society. (c) Explain one difference between the purpose of establishing a club and society and the purpose of a profit-oriented entity.

   Answer

   (a) A club and society is an organisation of seven or more members registered under the Societies Act 1966, formed for the common purpose of its members and not to earn profit for distribution to members.

   (b) Three sources of finance: members' subscriptions; donations and contributions; income from activities such as sales of event tickets, a cafe, or the sale of goods.

   (c) The aim of a club and society is to provide benefits and services to members, whereas the aim of a profit-oriented entity is to maximise profit for the owner.

3. Question 3

   Question 3 (Receipts and Payments Account). Cahaya Murni Youth Association has an opening cash/bank balance of RM1,200 on 1 January 2025. Receipts during the year: members' subscriptions RM8,400, donation for building fund RM5,000, dinner ticket sales RM2,000, bank interest RM60. Payments: salaries RM3,000, purchase of equipment RM4,500, dinner expenses RM1,500, rent RM1,800. Prepare the Receipts and Payments Account and determine the closing balance.

   Answer

   Refer to the Receipts and Payments Account table.

   Total receipts (including opening balance) = 1,200 + 8,400 + 5,000 + 2,000 + 60 = RM16,660

   Total payments = 3,000 + 4,500 + 1,500 + 1,800 = RM10,800

   Closing balance (cash/bank balance c/d) = 16,660 - 10,800 = RM5,860.

   This balance is carried to the next year; it is not the surplus of income.

4. Question 4

   Question 4 (Item classification). Based on the data in Question 3, identify the items in the Receipts and Payments Account that are NOT recorded in the Income and Expenditure Account and give a reason for each.

   Answer

   Items not recorded in the Income and Expenditure Account:

   1. Opening cash/bank balance RM1,200: an asset balance brought in, not income or expense of the current year.

   2. Donation for building fund RM5,000: a capital receipt for a special fund; it appears as a separate fund in the Statement of Financial Position, not as ordinary income.

   3. Purchase of equipment RM4,500: capital expenditure to acquire a non-current asset; only its depreciation (if any) becomes a revenue expense.

   Capital or non-current-year receipts and payments are excluded because the Income and Expenditure Account records only the current year's revenue income and revenue expenditure.

5. Question 5

   Question 5 (Activity Trading Account). Damai Recreation Club runs a cafe. For 2025: opening drinks stock RM400, purchases of drinks RM3,200, closing drinks stock RM500, sales of drinks RM5,000, cafe workers' wages RM400. (a) Calculate the profit or loss of the cafe activity. (b) State whether this profit-seeking activity contradicts the aim of the club.

   Answer

   (a) Cost of sales = opening stock 400 + purchases 3,200 - closing stock 500 = RM3,100.

   Gross profit = sales 5,000 - cost of sales 3,100 = RM1,900.

   Net profit of the cafe = gross profit 1,900 - wages 400 = RM1,500.

   The cafe profit of RM1,500 is transferred to the Income and Expenditure Account as income.

   (b) It does not contradict. The cafe is an incidental activity and the RM1,500 profit is used to fund the club's activities for members' benefit, not distributed to members. It would contradict only if profit-seeking became the club's main motive for existence.

6. Question 6

   Question 6 (Accumulated Fund). On 1 January 2025, Warisan Arts Club had the following assets and liabilities: Equipment RM6,000; Stock RM400; Subscriptions in arrears RM300; Cash and bank RM1,200; Subscriptions in advance RM150; Creditors RM250. Calculate the Accumulated Fund on 1 January 2025.

   Answer

   Accumulated Fund = Total assets - Total liabilities.

   Total assets = Equipment 6,000 + Stock 400 + Subscriptions in arrears 300 + Cash and bank 1,200 = RM7,900.

   Total liabilities = Subscriptions in advance 150 + Creditors 250 = RM400.

   Accumulated Fund = 7,900 - 400 = RM7,500.

   The Accumulated Fund works like owner's capital: it shows the members' net interest in the club, but no member can personally withdraw it as drawings.