Prepare accounts for a club’s trading and revenue activities
Separate a club's shop, café or event trading result from its overall income and expenditure account.
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 shop has opening stock $500, purchases $2,100 and closing stock $450. What is cost of sales?
What you will learn
- Prepare a trading account for a revenue-generating activity
- Transfer the activity's surplus or deficit to the income and expenditure account
- Apply accruals and inventory adjustments without mixing receipts with income
Calculate the activity result first
A club may run a café, shop, tournament or other revenue activity. Prepare the relevant trading or activity account to calculate gross surplus: sales or activity income less cost of sales and direct costs. Cost of sales uses opening inventory plus purchases and direct costs, less closing inventory, where applicable.
Deduct relevant operating expenses to find the activity's surplus or deficit. Transfer that result to the club's income and expenditure account. Cash collected at an event is not necessarily all income for that period if there are unpaid amounts, advance bookings, refunds or closing inventory.
Keep shared costs and restricted receipts visible
Allocate expenses only when a reasonable basis is supplied or can be justified. A club-wide rent expense should not be charged entirely to the café without evidence. Record inventory at the required valuation and account for accruals/prepayments using the same principles as other financial statements.
If an activity receives restricted sponsorship or donations, follow the stated terms and present those funds transparently. The activity's accounting result contributes to the club's overall surplus/deficit but does not replace the receipts and payments account or the statement of financial position.
Pause and explain
A cafe has sales $8,000 and cost of sales $5,100. What is the gross surplus before operating expenses?
Worked example
A club café has sales $7,500, opening inventory $400, purchases $3,000 and closing inventory $600. Direct and operating expenses are $1,900. Calculate the café surplus.
Show the worked solution
- Cost of sales = $400 + $3,000 − $600 = $2,800.
- Gross surplus = $7,500 − $2,800 = $4,700.
- Café surplus = $4,700 − $1,900 = $2,800.
Answer Café surplus is $2,800 before any additional shared cost allocation supported by the records.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
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 opens with cash $4,000. During the year it receives subscriptions $18,000, event cash $5,000, a restricted facility donation $10,000 and interest $250. It pays rent $6,000, wages $4,000, equipment $10,000, event costs $2,000 and loan principal $1,000. Prepare the cash summary and calculate closing cash.
Give me a hint
Include all cash receipts and payments, including capital and financing items; do not treat the cash summary as the income statement.
Compare my reasoning
- Total receipts = $18,000 + $5,000 + $10,000 + $250 = $33,250; cash available = $4,000 + $33,250 = $37,250.
- Total payments = $6,000 + $4,000 + $10,000 + $2,000 + $1,000 = $23,000.
- Closing cash = $37,250 − $23,000 = $14,250. The donation is restricted and equipment/loan principal are not ordinary period expenses simply because they appear as cash payments.
The receipts and payments account shows receipts $33,250, payments $23,000 and closing cash $14,250. It includes restricted and capital/financing cash items, so it is not the club's income and expenditure result.
Look for these in your work
- Opening cash included
- All receipts and payments classified
- Closing cash reconciles
A club shop sells goods for $14,000. Opening inventory is $1,200, purchases $6,800, purchase returns $300 and closing inventory $1,500. Shop wages are $2,100. Calculate cost of sales and shop surplus before shared expenses.
Give me a hint
Reduce purchases by returns before calculating cost of sales.
Compare my reasoning
- Net purchases = $6,800 − $300 = $6,500.
- Cost of sales = $1,200 + $6,500 − $1,500 = $6,200.
- Gross surplus = $14,000 − $6,200 = $7,800; after shop wages, surplus = $5,700.
Cost of sales is $6,200; shop surplus before shared expenses is $5,700.
Look for these in your work
- Returns deducted
- Closing stock deducted
- Wages deducted after gross surplus
A club's café makes a surplus, but members complain that its prices are subsidising other activities. What evidence should the committee review before changing the café's prices?
Give me a hint
Use the activity account and relevant nonfinancial and allocation evidence.
Compare my reasoning
- Review the café's sales, inventory, direct costs, wages and contribution to the club's overall result.
- Check any shared-cost allocation basis so that the committee does not misread an arbitrary rent charge as café performance.
- Consider member access, demand, food quality, alternatives and whether a price change could reduce participation or increase the surplus.
Review the café's standalone and allocated results, then weigh affordability, demand and service quality. The activity account informs the decision but does not by itself determine the right price.
Look for these in your work
- Financial result reviewed
- Cost allocation scrutinised
- Member impact considered
Common mistakes
- Treating all cash collected as activity income
- Charging shared costs without a stated or reasonable allocation basis
What can you explain now?
How does the club café's final surplus affect the club's income and expenditure account?
Compare with the explanation
It is included as activity income/surplus
The activity result forms part of the club's period income/expenditure, while other statements remain necessary.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Which account reports a club's overall surplus or deficit after a shop or event's result is transferred?
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.