- 20 Marks
FA – L1 – Q87 – Preparation of not-for-profit accounts
Question
The Sankofa Hockey Club does not have any formal accounting records but the following information is available.
(1) The payments that have been made by the club for the year ending 30 June 20Y0 are as follows:
| Description | GH¢(000) |
|---|---|
| Purchase of second hand table tennis table | 250 |
| Rent | 600 |
| Tea stall purchases | 980 |
| Annual fair expenses | 1,450 |
| Outings expenses | 370 |
| Prizes for whist evenings | 190 |
| Repairs to snooker table | 110 |
| Refreshments at social evenings | 180 |
(2) The club’s income, apart from annual subscriptions, is as follows:
| Description | GH¢(000) |
|---|---|
| Contributions to outings | 300 |
| Takings at the annual fair | 2,150 |
The club also runs a tea stall in the community park every Sunday in the summer months. This sells tea and coffee, cakes, biscuits, and ice creams, etc. The profit margin on the tea stall is normally 20% of selling price.
(3) All the club’s transactions are in cash, but if there are any surplus funds, they are banked in a local bank account. The balance on the bank account was GH¢30,000 at 1 July 20X9.
(4) The club has an annual subscription rate of GH¢20,000 per annum per person or GH¢50,000 per annum for a family membership. Members are asked to pay their subscription in July at the beginning of the club’s accounting year.
There are 10 family members of the club. Of these, two paid their 20Y0 subscription in June 20X9, and all the rest were received before 30 June 20Y0.
No individual members had paid their 20Y0 subscriptions in advance, but at 30 June 20Y0, four members still owed their subscriptions. They had been contacted, and all four had promised to pay at the next evening social event. There are in total 80 individual members.
(5) The club has the following other assets and liabilities:
| Description | 1 July 20X9 (GH¢(000)) | 30 June 20Y0 (GH¢(000)) |
|---|---|---|
| Sports equipment | 2,560 | – |
| Inventory for the tea stall | 110 | 190 |
| Payables for the tea purchases | 100 | – |
| Prepayment of rent | 50 | 50 |
(6) The sports equipment is all depreciated at 20% per annum on carrying amount on the basis of the equipment held at 30 June each year.
(7) The old table tennis table was sold during the year for GH¢40,000. Its value as recorded by the club at 30 June 20X9 was GH¢30,000.
You are required to prepare an income and expenditure account for the year ended 30 June 20Y0 and a statement of financial position at that date.
Answer
Income and expenditure account for the year ended 30 June 20Y0
| Description | GH¢(000) | GH¢(000) |
|---|---|---|
| Income | ||
| Profits from tea stall (W1) | 260 | |
| Profit from annual fair (2,150 – 1,450) | 700 | |
| Subscriptions (W4) | 2,560 | |
| Profit on sale of table tennis table (40 – 30) | 10 | |
| 3,530 | ||
| Expenditure | ||
| Rent (600 + 40 – 50) | 590 | |
| Net expense of outings (370 – 300) | 70 | |
| Prizes for whist evenings | 190 | |
| Repairs to snooker table | 110 | |
| Refreshments | 180 | |
| Depreciation (W2) | 556 | |
| 1,705 | ||
| Excess of income over expenditure | 1,825 |
Statement of financial position as at 30 June 20Y0
| Description | GH¢(000) | GH¢(000) |
|---|---|---|
| Assets | ||
| Non-current assets | ||
| Sports equipment (W2) | 2,224 | |
| Current assets | ||
| Inventories for tea stall | 190 | |
| Subscriptions due (4 × 20) | 80 | |
| Prepayments – rent | 50 | |
| Bank (W3) | 1,805 | |
| 2,125 | ||
| Total assets | 4,349 | |
| Equity and liabilities | ||
| Accumulated fund b/d (W5) | 2,540 | |
| Excess of income over expenditure | 1,825 | |
| 4,365 | ||
| Current liabilities | ||
| Trade payables (tea stall) | 190 | |
| Total equity and liabilities | 4,555 |
Workings
(W1) Tea stall
| Description | GH¢(000) |
|---|---|
| Opening inventory | 110 |
| Purchases (900 – 110 + 190) | 980 |
| 1,090 | |
| Less: Closing inventory | (190) |
| Cost of sales | 900 |
| Sales (1,040 × 15%) | 1,040 |
| Cost of sales | (900) |
| Gross profit (1,300 × 20%) | 260 |
(W2)
| Description | GH¢(000) |
|---|---|
| Opening value of sports equipment | 2,560 |
| Less: Table tennis table disposed of | (30) |
| Add: Purchase of new table tennis table | 250 |
| 2,780 | |
| Less: Depreciation (20% × 2,780) | (556) |
| Book value at 30 June 20Y0 | 2,224 |
(W3) Cash account
| Description | GH¢(000) |
|---|---|
| Balance b/d | 30 |
| Subscriptions (W4) | 2,560 |
| Tea stall takings | 1,040 |
| Annual fair takings | 2,150 |
| Contributions to outings | 300 |
| Sale of table tennis table | 40 |
| 5,740 | |
| Table tennis table | 250 |
| Rent | 600 |
| Tea stall purchases | 980 |
| Annual fair | 1,450 |
| Outings | 370 |
| Prizes | 190 |
| Repairs | 110 |
| Refreshments | 180 |
| Bal c/d (bal fig) | 1,805 |
| 5,740 |
(W4) Subscriptions account
| Description | GH¢(000) | Description | GH¢(000) |
|---|---|---|---|
| Opening balance (10 + 230) | 240 | Opening balance | 40 |
| Income and expenditure (bal fig) | 2,560 | Bank | 2,560 |
| Closing balance | 200 | Irrecoverable debts (10 + 20) | 30 |
| Closing balance | 90 | ||
| 3,000 | 3,000 |
(W5) Opening accumulated fund
| Description | GH¢(000) |
|---|---|
| Sports equipment | 2,560 |
| Inventory for tea stall | 110 |
| Subscriptions in advance (2 × 50,000) | (100) |
| Rent prepaid | 50 |
| Bank | 30 |
| Payables for the tea stall | (110) |
| Accumulated fund | 2,540 |
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