Accounting 9706 · AS & A Level · Preparation of financial statements
Preparation of financial statements — practice question
The Pavey Sports and Social Club operates as a not for profit organisation. Its accounts are drawn up every year to 31 March. For several years, membership has stayed constant at 350 members, each paying an annual subscription of $100. To increase membership, a life membership scheme was introduced. On 1 April 2015, 25 new members joined under this scheme, paying $750 each. The life membership fund is to be transferred to the income and expenditure account over 15 years.
(a)[2]
Distinguish the terms ‘capital’ and ‘accumulated fund’ from each other.
(b)[14]
Prepare the income and expenditure account for the year ended 31 March 2016, showing the profit or loss from the restaurant separately within the account.
(c)[2]
Explain why a club may choose to capitalise donations received from its members.
(d(i))[4]
Compare and contrast two sources of finance that the club could use.
(d(ii))[3]
Advise the club members on which source of finance would be most appropriate. Justify your answer.
Worked solution & mark scheme
This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Capital is the sum invested by the owners in a trading organisation.” …