Statement of Profit or Loss for Trading Activities (Cambridge International A-Level Accounting)
Statements of profit or loss for clubs & societies
Spec point — how to prepare, from full or incomplete accounting records: – accounts for trading and revenue-generating activities
Statements of profit or loss for clubs & societies
Why might clubs and societies prepare statements of a profit or loss?
- Statements of profit or loss are prepared when the club or society involves a trading activity which buys and sells goods to raise extra money
- A separate statement of profit or loss is prepared for each trading activity
- The profits or losses made from the trading activities are transferred to the income and expenditure account
What is included in the statements of profit or loss for trading activities?
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The statement of profit or loss is very similar to that of other businesses
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Some expenses might be apportioned between the trading activity and the club
- For example, 40% of the heating and lighting might be charged to a shop and the other 60% is charged to the club
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It is important that only expenses relating to the trading activity are included
- The other expenses will appear on the income and expenditure account
Layout of a statement of profit or loss for a trading activity of a club or society
Worked Example Paramount Badminton Club owns badminton courts. It also operates a shop where it sells refreshments and badminton equipment. Shop sales are on a cash basis and purchases made for the shop are on credit.
The treasurer of the club provided the following information.
1 January 2023 31 December 2023 $ $ Subscriptions in advance 2 200 2 050 Subscriptions in arrears 6 515 6 850 Total shop trade payables 5 375 5 950 Shop inventory 3 600 3 200 Balance at bank 360 220 Other information provided for the year ended 31 December 2023:
Shop sales 48 120 Subscriptions received during the year 38 700 Shop purchases 36 200 Shop purchases returns 2 710 Shop wages 4 820 Wages for the club caretakers 2 650 Rent 3 640 Bank charges for the club 80 Telephone for the club 380 Advertising for the club 460 Depreciation of equipment for the shop 520 Rent is apportioned 40% to the shop and 60% to the club.
Prepare the shop statement of profit or loss for the year ended 31 December 2023.
Answer:
Only income and expenses related to the shop appear on the shop's statement of profit or loss
- Do not include anything that is for the club in general such as subscriptions
Find the portion of rent to charge to the shop
40% × $3 640 = $1 456
Final answer: Paramount Badminton Club
Final answer: Shop Statement of Profit or Loss for the year ended 31 December 2023Final answer: $** Final answer: $ Final answer: Shop sales Final answer: 48 120 Final answer: Less: Cost of sales Final answer:** Opening Inventory ** Final answer: 3 600 Final answer:** Purchases ** Final answer: 36 200 Final answer: 39 800 Final answer:** Purchases returns ** Final answer: (2 710) Final answer: 37 090 Final answer:** Closing inventory ** Final answer: (3 200) Final answer: 33 890 Final answer:** Final answer: 14 230 Final answer: Less: Expenses Final answer: Wages Final answer: 4 820 Final answer: Rent Final answer: 1 456 Final answer: Depreciation of equipment Final answer: 520 Final answer: (6 796) Final answer: Shop profit Final answer: 7 434
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