Book-keeping · Lesson 11

Receipts and payments, income and expenditure, subscriptions, accumulated fund

WAECNECO

What the syllabus asks

WAEC: WAEC/NECO Book-keeping topic 14, Accounts of Not-for-Profit Making Organisations: (1) receipts and payments account: purpose, users and contents; preparation; (2) income and expenditure account: purpose, users and contents; preparation. Extends fa11.

NECO: WAEC/NECO Book-keeping topic 14, Accounts of Not-for-Profit Making Organisations: (1) receipts and payments account: purpose, users and contents; preparation; (2) income and expenditure account: purpose, users and contents; preparation. Extends fa11.

What you will learn

Describe the nature and features of not-for-profit organisations.
State the purposes, users and contents of the receipts and payments account.
Prepare a receipts and payments account.
State the purposes, users and contents of the income and expenditure account.
Calculate subscriptions income using a subscriptions account.
Find the accumulated fund with a statement of affairs.
Prepare an income and expenditure account and balance sheet.
Distinguish the two accounts and explain controls over club funds.

Key points

Clubs and associations aim at service, not profit.
Surplus, deficit and accumulated fund replace profit, loss and capital.
R&P account summarises cash; starts and ends with cash and bank.
I&E account follows accruals; revenue items of the year only.
Capital purchases go to the balance sheet; depreciation to I&E.
Subscriptions account separates arrears and advance.
Events and bars are shown net.
Statement of affairs gives the opening fund.
Closing fund = opening fund + surplus.
Receipts, banking, two signatories and audit protect club funds.

Start here: Nature of not-for-profit organisations

Not-for-profit organisations exist to provide a service to their members or to society, not to make profit for owners. Examples in Nigeria: social and sports clubs; old students’ associations; town and community development unions; professional associations; churches and mosques; parent–teacher associations; cooperative and welfare societies; charities and NGOs; market women’s associations.

Features

Aim: service and welfare, not profit.
Members rather than owners; members do not share any surplus.
Funds come mainly from subscriptions (dues), entrance fees, donations, levies, grants and fund-raising events.
Management by an elected executive committee: chairman or president, secretary, treasurer (who keeps the money and the books), and others.
Accountability: the treasurer presents accounts at the annual general meeting (AGM), usually audited by members appointed as auditors.

Terms that change

Because there is no owner and no profit motive, the terms are different: the excess of income over expenditure is a surplus (not profit); the opposite is a deficit; the members’ interest is the accumulated fund (not capital); the statement of income and expenses is the income and expenditure account (not profit and loss). A club that runs a bar or canteen may also prepare a bar trading account to find the bar’s profit.

Worked example 11.1

Give two reasons why the members of Ikenne Old Students’ Association want proper accounts from their treasurer.

Solution. (i) To be sure the dues and donations they paid were used for the purposes agreed, such as scholarships, and not misused. (ii) To decide future activities and dues: if there is a deficit, the AGM may raise subscriptions or organise a fund-raiser.

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Practice questions

1. In a club, the excess of expenditure over income is a

deficit
surplus
gross loss
net profit

Show answer

A: deficit
Deficit.

2. The capital of a club is called the

share capital
reserve
current account
accumulated fund

Show answer

D: accumulated fund
Accumulated fund.

3. A receipts and payments account is a summary of the

balance sheet
journal
cash book
ledger

Show answer

C: cash book
Cash summary.

4. The income and expenditure account is prepared on the

tax basis
accruals basis
cash basis
barter basis

Show answer

B: accruals basis
Accruals.

5. Opening 505,000; receipts 1,888,000; payments 1,754,000. Closing balance is

₦639,000
₦505,000
₦2,393,000
₦134,000

Show answer

A: ₦639,000
505 + 1,888 − 1,754.

Key words

Not-for-profit organisation: Body formed for service, not profit.
Treasurer: Officer in charge of funds and accounts.
Receipts and payments account: Summary of the cash book.
Income and expenditure account: Statement of income and expenses of the year.
Surplus: Excess of income over expenditure.
Deficit: Excess of expenditure over income.
Accumulated fund: Assets less liabilities of a club.
Subscriptions: Members’ regular dues.
Arrears: Subscriptions owing.
Subscriptions in advance: Dues paid for a future period.
Entrance fee: Fee paid on joining.
Statement of affairs: List of assets and liabilities to find the fund.

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