The following is the receipt and payments account of Kayode social club for the year ended 31st December 2014. Receipts and payments for the year ended 31st...
Question 1 Report
The following is the receipt and payments account of Kayode social club for the year ended 31st December 2014.
Receipts and payments for the year ended 31st December 2014
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Additional Information;
i. Equipment was valued at N3,250 and furniture N1,550 on 31st December 2013
ii. Depreciation to be provided as follows:
Equipment N505
Furniture N55
iii. The following expenses were outstanding
| Salaries | N300 |
| Transport | N100 |
| Repairs | N250 |
iv. Subscriptions owing by members were as follows:
| 31st December 2013 | N1,200 |
| 31st December 2014 | N2,100 |
v. The balance in the bank deposit account at 31st December 2013 was N300
You are required to prepare;
(a) Statement of affairs as at 31st December 2013.
(b) Subscription account for the year ended 31st December 2014.
(c) Income and Expenditure account for the year ended 31st December 2014
Answer Details
Preliminary note. A Receipts and Payments account is a summary of cash and bank movements. It mixes capital items (equipment, furniture, deposit transfers) with revenue items, and it ignores accruals and non-cash charges such as depreciation. To produce non-profit final accounts we must (i) find the opening Accumulated Fund through a Statement of Affairs, (ii) convert subscriptions received into subscriptions earned, and (iii) adjust each revenue expense for outstanding amounts and add depreciation.
(a) Statement of Affairs as at 31st December 2013
This statement lists what the club owned and owed at the start of the year. The balancing figure is the Accumulated Fund (the club's capital).
| Assets | N |
|---|---|
| Equipment | 3,250 |
| Furniture | 1,550 |
| Bank deposit account | 300 |
| Subscriptions in arrears (owing by members) | 1,200 |
| Cash in hand | 500 |
| Cash at bank | 1,000 |
| Total assets | 7,800 |
| Less liabilities | Nil |
| Accumulated Fund | 7,800 |
The Accumulated Fund at 1st January 2014 is therefore N7,800.
(b) Subscription Account for the year ended 31st December 2014
Cash received during the year was N7,500 (2013 arrears N1,200 + 2014 N4,000 + 2015 advance N2,300). We adjust for arrears at each year end (an asset, owed by members) and advances (a liability, paid ahead). The transfer to Income and Expenditure is the balancing figure, being the subscription earned in 2014.
| Dr | N | Cr | N |
|---|---|---|---|
| Balance b/d (arrears 1/1/2014) | 1,200 | Bank (subscriptions received) | 7,500 |
| Income and Expenditure (earned 2014) | 6,100 | Balance c/d (arrears 31/12/2014) | 2,100 |
| Balance c/d (advance for 2015) | 2,300 | ||
| Total | 9,600 | Total | 9,600 |
| Balance b/d (arrears) | 2,100 | Balance b/d (advance) | 2,300 |
Subscription earned and transferred to Income and Expenditure = N6,100.
(c) Income and Expenditure Account for the year ended 31st December 2014
Capital items (purchase of equipment N1,800, purchase of furniture N3,000, transfer from deposit account N3,000) are excluded. Each expense is raised to the amount incurred by adding the outstanding balance, and depreciation is charged.
| Expenditure | N | Income | N |
|---|---|---|---|
| Salaries (1,700 + 300) | 2,000 | Subscriptions | 6,100 |
| Repairs (1,500 + 250) | 1,750 | Donations | 2,000 |
| Insurance | 1,000 | End of year show | 15,000 |
| Show expenses | 3,200 | ||
| Transport (500 + 100) | 600 | ||
| Secretarial expenses | 300 | ||
| Depreciation: Equipment | 505 | ||
| Depreciation: Furniture | 55 | ||
| Surplus (excess of income over expenditure) | 13,690 | ||
| Total | 23,100 | Total | 23,100 |
The club earned a surplus of N13,690 for the year. Total expenditure of N9,410 is deducted from total income of N23,100 to arrive at this figure.
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