9706 · 3.1.3
Clubs and Societies — FAQ
Frequently asked questions for 9706 Clubs and Societies. Direct answers first, then deeper explanation — then practise with marking.
What is the real difference between a surplus and a profit?
Functionally, they are calculated in a similar way (Income - Expenses). However, the terminology reflects the organisation's purpose. 'Profit' implies a commercial goal of returning value to owners. 'Surplus' implies that the excess funds will be retained and reinvested by the non-profit organisation to further its objectives, not distributed to owners.
Why do I have to prepare a subscriptions T-account? Can't I just use the cash received?
You cannot just use the cash figure because the Income and Expenditure Account must be prepared on the accruals basis. The cash received includes payments for last year and next year, and excludes amounts owed from this year. The T-account is the most reliable method to adjust the cash figure to find the true income for the current period only.
Where does a specific donation for a new building go in the financial statements?
It does NOT go into the Income and Expenditure Account. When the cash is received, it increases the bank balance (asset). A corresponding liability called 'Building Fund' or 'Specific Donation Fund' is created. This liability remains on the Statement of Financial Position until the money is spent on the building. When spent, the asset (Building Fund) is used to pay, and the value is transferred to Non-Current Assets.
If a club sells an old non-current asset, how is that treated?
The cash received from the sale will appear in the Receipts and Payments Account. However, for the Income and Expenditure Account, you must calculate the profit or loss on disposal. This is done by comparing the net book value (Cost - Accumulated Depreciation) with the sale proceeds. The resulting profit or loss on disposal is then shown in the Income and Expenditure Account.