CIMA CO2 Official Learning System - Fundamentals of Financial Accounting

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

REVISION QUESTIONS C2

390

Workings

Purchases $

Equipment

Subscriptions

(a) Bar trading account of Long Lane Social Club for the year ended 31 December 20X5

$ $

Sales

Less : cost of sales

Opening inventories

Purchases

Less : closing inventories

Gross proﬁ t

Less : expenses

Barperson’s wages

Bar licence fees

Net proﬁ t

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

391

FUNDAMENTALS OF FINANCIAL ACCOUNTING

(b) Income and expenditure statement of Long Lane Social Club for the year ended 31

December 20X5

$ $ $

Income

P r o ﬁ t on refreshments

Expenditure

Surplus for the year

(c) Statement of ﬁ nancial position of Long Lane Social Club as at 31 December 20X5

Assets Cost ($) Accumulated dep’n ($) Carrying Amount ($)

Non-current assets

Current assets

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

REVISION QUESTIONS C2

392

Accumulated fund and liabilities

Accumulated fund

Current liabilities

Statement of affairs of Long Lane Social Club as at 1 January 20X5

$ $

Assets

Less : liabilities

Question 4

The HB tennis club was formed on 1 April 20X0 and has the following receipts and pay-

ments account for the 6 months ended 30 September 20X0:

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

393

FUNDAMENTALS OF FINANCIAL ACCOUNTING

Receipts $ Payments $

Subscriptions 12,600 Purchase of equipment 4,080

Tournament fees 465 Groundsperson’s wages 4,520

Bank deposit interest 43 Rent 636

Sale of club ties 373 Heating and lighting 674

Life membership fees 4,200 Postage and stationery 41

Court maintenance 1,000

Tournament prizes 132

Purchase of club ties 450

Balance c/d 6,148

17,681 17,681

Notes :

1. The annual subscription fee is $300. On 30 September, there were ﬁ ve members who

had not paid their subscriptions, but this money was received on 4 October 20X0.

2. The equipment is expected to be used by the club for 5 years, after which time it will

need to be replaced. Its estimated scrap value at that time is $50.

3. During the 6 months, the club purchased 100 ties printed with its own design. Forty of

these ties remained unsold at 30 September 20X0.

4. The club has paid rent in advance on 30 September 20X0 of $68.

5. The club treasurer estimates that the following amounts should be accrued for

expenses:

$

Grounds person’s wages 40

Postage and stationery 12

Heating and lighting 53

6. The life membership fees received relate to payments made by four families. The

scheme allows families to pay $1,050, which entitles them to membership for life with-

out further payment. It has been agreed that such receipts would be credited to income

and expenditure in equal instalments over 10 years.

Requirements

(a) Calculate the following items to be included in the income and expenditure statement

for the period, using the boxes provided.

(i) Subscriptions

$

Subscriptions received for the year

Subscriptions accrued for the year

Total subscriptions for the year

Subscriptions for the 6 months

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

REVISION QUESTIONS C2

394

(ii) Proﬁ t from the sale of club ties

$ $

Sales of ties

Purchases of ties

Less : closing inventories

P r o ﬁ t

(iii) Life membership fees

$

Amounts received

Annual equivalent

Amount to include in I and E

(iv) Depreciation of equipment

$

Cost

Annual depreciation

Amount to include in I & E

(b) Insert the missing items into the income and expenditure statement given below.

Income and expenditure statement of HB Tennis Club for the 6 months ended 30

September 20X0

$  $ $

Income

Subscriptions

Income from tournaments



Interest received on bank deposit

43

P r o ﬁ t from sale of club ties

Life membership

Expenditure

Groundsperson’s wages



Rent



Heat and light



Postage and stationery



Court maintenance

1,000

Depreciation of equipment

Excess of income over expenditure

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

395

FUNDAMENTALS OF FINANCIAL ACCOUNTING

Question 5

The Questing Theatre Club is an amateur dramatic club that rents premises in which it

has established a theatre and bar for the use of its members. The club’s treasurer has pro-

duced the following summary of the club’s receipts and payments during the year ended

31 May 20X2:

Receipts and payments account for the year ended 31 May 20X2

Receipts $ Payments $

Cash and bank balances b/f 1 , 120 Secretarial expenses 550

Members ’ subscriptions 4,460 Rent of premises 1,990

Donations 500 Production expenses 18,800

Bar takings 25,900 Bar suppliers 14,700

Ticket sales 17,320 Bar expenses 4,180

Grants and subsidies 13,800 Fees of guest artists 900

Stationery, printing & publicity 1,100

Purchase of theatre equipment 15,100

Other expenses 4,820

Cash and bank balances c/f 960

63,100 63,100

The treasurer has also been able to supply the following information:

1 June 20X1 31 May 20X2

$ $

Subscriptions in arrears 350 460

Subscriptions in advance 160 60

Owing to bar suppliers 1,300 1,650

Bar inventories 2,670 2,330

Production expenses owing 2,490 1,540

Stationery, printing and publicity prepaid 400 300

Valuation of bar equipment 14,500 11,500

Valuation of theatre equipment 35,000 46,000

The club’s chairman is keen that the report given to members should show the proﬁ t

or loss made by the bar and the surplus or deﬁ cit made on theatre productions. Only

those items that can be directly allocated to the bar or the theatre productions are to be

included.

REVISION QUESTIONS C2

396

Requirements

(a) Prepare the club’s subscriptions account using the ledger account below:

Subscriptions

$ $

(b) Prepare the bar trading account by completing the boxes in the statements below:

(i) Bar purchases

$ $

(ii) Bar trading account for the year ended 31 May 20X2

$ $

Sales

Less : cost of goods sold

Inventories at the start of the year

Purchases

Inventories at the end of the year

Gross proﬁ t

Less : expenses

Bar expenses 4,180

Depreciation $  $ 

Bar proﬁ t

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

397

FUNDAMENTALS OF FINANCIAL ACCOUNTING

(c) Prepare the productions trading account by inserting the missing items into the boxes

in the statements below:

(i) Productions expenses

$ $

(ii) Depreciation of theatre equipment

$ $

(iii) Productions trading account for the year ended 31 May 20X2

$ $

Ticket sales

Less : cost of productions

Productions expenses

Fees of guest artists

900

Depreciation of theatre equipment

D e ﬁ cit on productions

(d) Prepare the Questing Theatre Club’s income and expenditure statement for the year

ended 31 May 20X2 by inserting the missing items into the statements below.

(i) Stationery, printing and publicity

$ $

INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS

REVISION QUESTIONS C2

398

(ii) Income and expenditure statement of Questing Theatre Club for the year ended

31 May 20X2

$ $

Income

Member subscriptions

Donations

500

Surplus on bar

Grants and subsidies

13,800

Expenditure

D e ﬁ cit on productions

Secretarial expenses

550

Rent of premises 1,990

Stationery, printing and publicity

Other expenses

4,820

Surplus

399

Solution 1

1.1 Answer: (D)

Accumulated fund is equivalent to capital, so answer D is correct.

1.2 Answer: (C)

An income and expenditure statement (or account) is commonly prepared by a not-

for-proﬁ t organisation as an alternative to an income statement. A summary of cash

and bank transactions, and a receipts and payments account, are one and the same

thing: they both include capital transactions, for example, payments for non-current

assets, and neither takes account of accrued and prepaid income or expenses. Thus

answers A and B are incorrect. A statement of ﬁ nancial position is a statement of

assets, liabilities and capital or accumulated fund.

1.3 The calculation is:

$

Subscriptions received in 20X5 12,500

Less: relating to 20X4 (800)

Less: relating to 20X6 (400)

11,300

Add: subscriptions in arrears 250

11,550

1.4 Answer: (A)

Life membership fee represents income in advance and this is credited to a life

membership fees account. A proportion of income is transferred to the income and

expenditure statement over the assumed life of the membership.

Solutions to Revision

Questions

11

CIMA CO2 Official Learning System - Fundamentals of Financial Accounting

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