prepare income and expenditure accounts and statements of financial position

5.4 Clubs and Societies 📚

Income and Expenditure Accounts 💰

Think of an income and expenditure account as a club’s monthly diary that records every money that comes in and goes out. It shows whether the club made a profit (more money in than out) or a loss.

• Income – money received (e.g., membership fees, sponsorships, event tickets).
• Expenditure – money spent (e.g., equipment, venue hire, refreshments).
• Net Result – the difference between income and expenditure.

The basic formula is:

$Net\ Result = Total\ Income - Total\ Expenditure$

Step‑by‑Step Example: The Chess Club 🏰

1. Collect all income sources:
   • Membership fees: £200
   • Sponsorship: £150
   • Entry fee for tournament: £50
2. Record all expenditures:
   • New chess boards: £80
   • Venue hire: £40
   • Refreshments: £30
3. Calculate totals:
   • Total Income = £200 + £150 + £50 = £400
   • Total Expenditure = £80 + £40 + £30 = £150
4. Determine Net Result:

   $Net\ Result = £400 - £150 = £250$

   The club made a profit of £250.

Statement of Financial Position (Balance Sheet) 📊

A statement of financial position shows what the club owns (assets) and what it owes (liabilities) at a specific date, plus the net assets.

• Assets – items of value the club owns (e.g., cash, equipment).
• Liabilities – debts or obligations (e.g., loans, unpaid bills).
• Net Assets – the difference between assets and liabilities.

Formula:

$Net\ Assets = Total\ Assets - Total\ Liabilities$

Example: Chess Club Statement of Financial Position (as of 31 Dec 2025) ???

Practice Questions 📝

1. Given the following figures for the Drama Club, prepare an income and expenditure account:
   • Membership fees: £120
   • Ticket sales: £80
   • Cost of props: £50
   • Venue hire: £30
2. Using the result from question 1, draft a simple statement of financial position for the end of the month.
3. Explain in one sentence why a club should keep track of both income/expenditure and a balance sheet.

Good luck, future accountants! 🚀