Distinguish club receipts and payments from income and expenditure
Compare cash-based receipts and payments with accrual-based income and expenditure, then calculate the accumulated fund.
Section 3.1 · Preparation of financial statements
Exam scope and assessment notes
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These original lessons map all five Topic 3.1 objectives: financial-statement purpose; partnership changes; clubs and societies; manufacturing accounts; and limited-company financial statements and notes. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use the Topic 1.5 adjustment and statement skills: apply accruals, distinguish capital from revenue, reconcile balances, and keep each entity's owners' funds separate from income and cash.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
A club pays an annual insurance premium in cash this year, part of which relates to next year. What adjustment is needed for this year's expense?
What you will learn
- Distinguish receipts/payments from income/expenditure
- Calculate a period surplus or deficit
- Define the accumulated fund as net assets
Cash summary and performance account answer different questions
A receipts and payments account summarises cash received and cash paid during the period, regardless of which period the cash relates to. It includes capital and revenue cash flows and is not itself a statement of surplus or deficit.
An income and expenditure account applies accrual accounting: income is matched to the period it relates to and expenses are recognised when incurred. The difference is a surplus or deficit. Noncash depreciation and outstanding income/expenses can appear here without appearing as cash payments in the period.
The accumulated fund is members' net assets
The accumulated fund represents the club's net assets attributable to accumulated surpluses and other member funds: total assets less total liabilities at a date. Opening fund plus the year's surplus, less any deficit and other relevant fund movements, reconciles to the closing fund.
A large cash receipt can be a capital donation or a subscription received in advance rather than income for the current period. Use the stated restrictions and membership terms; do not infer the club made a surplus just because cash increased.
Pause and explain
A club has assets of $92,000 and liabilities of $17,000. What is the accumulated fund?
Worked example
A club has opening assets of $80,000 and liabilities of $15,000. Its income exceeds expenditure by $4,500 and there are no other fund movements. Calculate the opening and closing accumulated funds.
Show the worked solution
- Opening accumulated fund = $80,000 − $15,000 = $65,000.
- Closing fund = opening $65,000 + surplus $4,500.
- Closing accumulated fund = $69,500.
Answer Opening fund is $65,000 and closing fund is $69,500, assuming no other fund movements.
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Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A club receives $18,000 cash subscriptions. At year end, $1,200 remains due and $800 of cash relates to next year. Opening subscriptions due were $700 and opening advance subscriptions were $500. Calculate subscription income.
Give me a hint
Adjust cash for both opening and closing accruals and advances.
Compare my reasoning
- Start with cash received: $18,000.
- Add closing receivable $1,200; subtract opening receivable $700.
- Add opening advance $500; subtract closing advance $800. Income = $18,200.
Subscription income is $18,200. The formula is cash + closing accrued − opening accrued + opening advance − closing advance.
Look for these in your work
- Opening and closing receivables adjusted
- Opening and closing advances adjusted
- Income formula reconciles
Opening accumulated fund is $52,000. The club earns income $31,000 and incurs expenses $28,400. It also receives a restricted donation of $10,000 for a facility and records it in a separate capital fund under the stated policy. Calculate the operating surplus and total fund after the donation.
Give me a hint
Separate ordinary income/expenditure from a donation recorded directly in a separate fund.
Compare my reasoning
- Operating surplus = $31,000 − $28,400 = $2,600.
- Accumulated fund after operating surplus = $52,000 + $2,600 = $54,600.
- If the restricted donation is recorded directly in a separate capital fund, total funds are $54,600 + $10,000 = $64,600.
Operating surplus is $2,600; accumulated fund is $54,600 and total funds are $64,600 under the treatment explicitly stated. Follow the donation terms and adopted policy in other questions.
Look for these in your work
- Surplus calculated
- Donation not misclassified as ordinary income
- Stated policy followed
A club's cash falls by $2,000, but its income and expenditure account reports a $6,000 surplus. Give two reasons both results can be correct.
Give me a hint
Look for noncash expenses and timing differences, as well as capital cash movements.
Compare my reasoning
- Depreciation or another noncash expense reduces surplus without reducing cash in the period.
- Receivables, payables and advance subscriptions create differences between cash and accrued income/expense.
- Equipment purchases or loan repayments reduce cash but are not ordinary expenses in the income and expenditure account.
The cash summary and surplus measure different things. Noncash depreciation, working-capital timing and capital or financing payments can make cash fall while the club reports a surplus.
Look for these in your work
- Noncash item identified
- Accrual timing identified
- Capital/financing cash flow identified
Common mistakes
- Calling the receipts and payments account a profit statement
- Treating all cash received as current-year income
What can you explain now?
What does an income and expenditure account report?
Compare with the explanation
Accrual-based income and expenses for a period
It determines a period surplus or deficit using accrual accounting.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
State one item that may appear in receipts and payments but not as current-year income, and one item that may appear as an expense without a cash payment.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.