Tariro Chikafu keeps the accounts of the sports fund at a school in Kitwe, Zambia. Every pupil pays a yearly levy, and the fund runs a refreshment stall at ...

This is a club and society task set on a school sports fund. The fund does not trade for profit, so the receipts and payments account is only a summarised cash book: it must be converted onto the accruals basis before it can show what the year really cost. The refreshment stall is the one trading activity and gets its own trading account.

(a) Refreshment stall trading account [5]

The cash book shows what was paid for supplies, not what was bought. Adjust for the movement in the amount owing, then adjust the purchases for the movement in supplies held.

• Supplies purchased: $8 900 paid - $1 100 owed at the start + $1 450 owed at the end = $9 250.
• Cost of supplies used: $700 opening + $9 250 purchases - $850 closing = $9 100.

(b) Levy for the year [4]

Cash received is not the income. Arrears brought in were earned last year and collected this year, so they come out; arrears at the close were earned this year and go in. Advances work the other way round.

(c) Income and expenditure account for the year ended 31 December 2025 [9]

• Coaching fees: $9 400 paid - $800 owing at the start + $1 200 owing at the end = $9 800.
• Sports equipment depreciation: a tenth of cost, and the $12 000 of new equipment bears a full year in the year of purchase, so cost is $30 000 + $12 000 = $42 000 and the charge is 10% x $42 000 = $4 200. The $12 000 itself is capital expenditure and never appears as expenditure.

The stall takings of $14 500 and supplies of $8 900 do not reappear here; they have already been dealt with inside the $5 400. The $12 000 spent on equipment is likewise absent, replaced by its share of depreciation.

(d) Statement of financial position at 31 December 2025 [4]

The accumulated fund at the start is found from the opening position: assets of equipment $30 000 - $9 000 = $21 000, supplies $700, levy arrears $1 800 and bank $3 400, total $26 900, less liabilities of levy in advance $900, owing for supplies $1 100 and coaching fees owing $800, total $2 800. The fund is therefore $24 100.

(e) Effect of cutting the levy by $6 a pupil [3]

The reduction in income is 1 200 pupils x $6 = $7 200, so the surplus would fall from $16 200 to $9 000. Nothing else in the accounts changes, because the levy affects income alone.

Advice: the track is still within reach, but not comfortably. The fund holds $12 200 at the bank now and would expect to add roughly $9 000 of surplus over the next year, which covers the $15 000 with a margin. Two cautions apply. First, a surplus is not the same as cash: $2 400 of it sits in levy arrears that will only turn into money if the pupils concerned actually pay, and $3 950 of liabilities have to be settled. Second, the depreciation charge of $4 200 is not a cash outflow, so the cash generated is in fact rather better than the surplus suggests. On balance the fund could pay for the track after the cut, provided the arrears are collected and no other large purchase is made in the same year.