Statement of Financial Position

Accounting treatment of specific items related to non-trading organizations

1. Subscriptions: Subscriptions represent the primary source of income for non-trading organizations, collected annually from members. These are treated as revenue income and recorded in the Income and Expenditure Account for the relevant year.

2. Donations: Donations are voluntary contributions received from individuals or organizations, either in cash or kind. They are categorized as:

   • Donations for a Specific Purpose: Treated as capital receipts and shown on the liabilities side of the Balance Sheet under the relevant specific purpose fund.
   • General Donations: Treated as revenue income and credited to the Income and Expenditure Account.

3. Admission Fees: Admission fees, a one-time payment collected from members upon joining the organization, can be treated as either:

   • Revenue Income: If received regularly.
   • Capital Receipt: If considered non-recurring or exceptional in nature.

4. Life Membership Fees: Life membership fees are one-time payments received in lump sum. These are treated as capital receipts and credited directly to the capital or general fund in the Balance Sheet.

5. Receipts from Sale of an Old Asset: The total proceeds from the sale of old assets are recorded in the Receipt and Payment Account. Any profit or loss arising from the sale is transferred to the Income and Expenditure Account.

6. Receipts from Sale of Sports Materials: The sale of used sports materials, a regular activity for sports clubs, is treated as income and recorded in the Income and Expenditure Account.

7. Payment of Honorarium: An honorarium is a payment made to a professional or expert for rendering special services, such as a performance by an artist at a club event. This payment is treated as an expense and debited to the Income and Expenditure Account.

8. Endowment Fund: An endowment fund is a donation received for a specific purpose. Being a capital receipt, it is shown on the liabilities side of the Balance Sheet under a specific purpose fund.

9. Government Grants: Non-trading organizations often receive government grants to support their social welfare activities. Grants may be:

   • Regular: Treated as revenue income and credited to the Income and Expenditure Account.
   • One-time: Treated as a capital receipt and shown on the liabilities side of the Balance Sheet.

10. Stationery: Stationery expenses are considered consumable and typically debited to the Income and Expenditure Account. If opening and/or closing stock of stationery is provided, the cost of stationery consumed is calculated and shown in the Income and Expenditure Account.

Example 1

Receipts and Payments Account for the year ending 31^st^ December 2009

Receipts	Amount	Payments	Amount
Bank balance at 1.1.2009	52,400	Payment for bar supplies	3,862,000
Subscriptions received for		Wages:
2008 (arrears)	140,000	Groundsman and assistant	1,993,900
2009	1,435,000	Barman	862,400
2010 (in advance)	120,000	Bar expenses	23,400
Bar sales	6,128,000	Repairs to stand	74,000
Donations received	80,000	Ground upkeep	182,900
		Secretary's expenses	93,800
		Transport costs	242,000
		Bank balance 31.12.2009	621,000
	7,955,400		7,955,400

Additional information:

		31.12.2008	31.12.2009
i.		Sh.	Sh.
	Inventory in the bar–at cost	449,600	555,800
	Owing for bar supplies	329,400	434,000
	Bar expenses owing	22,500	33,600
	Transport costs	-	26,500

ii. The land and football stands were valued on 31^st^ December 2008 at land sh. 4,000,000; football stands sh. 2,000.000; the stands are to be depreciated by 10 per cent per annum.

iii. The equipment on 31^st^ December 2008 was valued at sh. 250,000, and is to be depreciated at 20 per cent per annum.

iv. Subscriptions owing by members amounted to Tsh. 140,000 on 31^st^ December 2008, and sh. 175,000 on 31^st^ December 2009.

From the information given above, prepare an income and expenditure account, subscriptions account, bar trading account, transport costs account, purchases control account as well as bar expenses account.

Solution

INCOME AND EXPENDITURE A/C FOR THE YEAR ENDED 31^ST^ DECEMBER 2009

Details	Amount	Details	Amount
Groundsman assistance wages	1,993,900	Subscription	1,610,000
Repairs to stand	74,000	Donation	80,000
Ground up-keep	182,900	Bar profit	1,370,700
Secretary expenses	93,800
Transport costs	268,500
Depreciation on:
Stands	200,000
Equipment	50,000
Surplus	197,600
	3,060,700		3,060,700

DR SUBSCRIPTION A/C CR

Date	Details	Amount	Date	Details	Amount
	Balance b/d	140,000		Cash	1,695,000
	Income and expenditure	1,610,000		Balance c/d	175,000
	Balance c/d	120,000
		1,870,000			1,870,000
	Balance b/d	175,000		Balance b/d	120,000

BAR TRADING FOR THE YEAR ENDED 21^st^ DECEMBER 2009

Details	Amount	Details	Amount
Opening stock	449,600	Sale's	6,128,000
Add: Purchases	3,966,600
Cost of goods available for sales	4,416,200
Less: Closing stock	555,800
Cost of goods sold	3,860,400
Gross profit c/d	2,267,600
	6,128,000		6,128,000
Bar expenses	34,500
Wages of Barman	862,400	Gross profit b/d	2,267,600
Bar profit	1,370,700
	2,267,600		2,267,600

DR TRANSPORT COSTS CR

Date	Details	Amount	Date	Details	Amount
	Cash	242,000		Income and Expenditure	268,500
	Bal. c/d	26,500
		268,500			268,500

Note: The amount of transport costs of 26,500 has been treated as accrued amount since the question is silent.

DR PURCHASES LEDGER CONTROL A/C CR

Date	Details	Amount	Date	Details	Amount
	Cash paid	3,862,000		Balance b/d	329,400
		434,000		Bar purchases	3,966,600
		4,296,000			4,296,000
				Balance b/d	434,000

DR BAR EXPENSES CR

Date	Details	Amount	Date	Details	Amount
	Cash	23,400		Balance b/d	22,500
	Balance c/d	33,600		Bar trading	34,500
		57,000
					57,000

Example 2

Following is the Receipts and Payments Account of Chilindima Social for the year ended December 31^st^ 2007:

Receipts	Amount	Payments	Amount
Balance b/f:		Salaries:
Cash 2,000		Secretaries 6,000
Bank 12,000	14,000	Staff 5,000	11,000
Subscription		Canteen expenses	12,000
For 2006 500		Miscellaneous expenses	2,500
For 2007 5,500		Construction of building	15,000
For 2008 400	6,400	Balance c/f:
Interest from bank	1,000	Cash 1,300
Sales proceeds of old newspaper	400	Bank 4,000	5,300
Sale of old furniture	2,000
Canteen collection	12,000
Donation for Building Fund	10,000
	45,800		45,800

With the additional information given below, prepare the income and Expenditure Account, Subscription Account for the year ended 31^st^ December 2007 and the Balance Sheet as at that date.

		31^st^ Dec 06	31^st^ Dec 07
i.	Subscription receivable	1,000
ii.	Subscription received in advance	200	400
iii.	Outstanding salary for staff	1,000	2,000
iv.	Canteen expenses prepaid	1,000	1,500
v.	Furniture at book value	14,000	?
vi.	Buildings	15,000	?
vii.	Fixed deposit with bank	10,000	10,000
viii.	Book value of furniture sold during 2007 was Shs. 3,500
ix.	Charge depreciation on furniture at 10 percent per annum on the closing balance.

Workings

DR STATE SALARY A/C CR

Cash	5,000	Balance b/d	1,000
Balance c/d	2,000	Income and Expenditure A/C	6,000
	7,000		7,000

DR CANTEEN A/C CR

Balance b/d	1,000	Income and expenditure A/B	11,500
Cash	12,000	Balance c/d	1,500
	13,000		13,000

DR FURNITURE A/C CR

Balance b/d	14,000	Disposal	35,000
Balance		Balance c/d	10,500
	14,000		14,000

DR INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31^ST^ DEC 2007 CR

Date	Details	Amount	Date	Details	Amount
	Salaries of staff	6,000		Subscription	5,800
	Salaries of secretaries	6,000		Interest	1,000
	Canteen expenses	11,500		Donation	10,000
	Miscellaneous expenses	2,500		Canteen collection	12,000
	Loss on disposal	1,500		Sale of new paper	400
	Depreciation	1,050
	Surplus	650
		29,200			29,200

DR SUBSCRIPTION A/C CR

Date	Details	Amount	Date	Details	Amount
	Balance b/d	1,000		Balance b/d	200
	Income and Expenditure	5,800		Cash	500
				Cash	5,500
				Cash	400
	Balance c/d	400		Balance c/d	600
		7,200			7,200

BALANCE SHEET AS AT 31^st^ DEC 2005

Capital 53,800	FIXED ASSETS
Add surplus 650	Building 30,000
New 54,450	Furniture 8,450
Current Liabilities	Current Assets
Subscription received in advance 400	Bank 4,000
Outstanding salary of staff 2,000	Cash 1,300
	Fixed deposits 10,000
	Subscription in areas 600
56,850	Prepaid canteen expansion of 1,500
	56,850