Accounting 9706 · AS & A Level · Preparation of financial statements
Preparation of financial statements — practice question
The Pavey Sports and Social Club operates on a not for profit basis. Accounts are drawn up every year to 31 March. For a number of years, membership has stayed unchanged at 350 members, each paying an annual subscription of $100. A life membership scheme was introduced in an effort to increase membership. On 1 April 2015, 25 new members joined through this scheme, paying $750 each. It was agreed that the life membership fund would be released to the income and expenditure account over 15 years.
(a)[2]
Distinguish how ‘capital’ differs from ‘accumulated fund’.
(b)[14]
Set up the income and expenditure account for the year ended 31 March 2016, and show the restaurant profit or loss separately within the account.
(c)[2]
Explain why a club might capitalise donations obtained from its members.
(d(i))[4]
Compare and contrast two possible sources of finance that the club could use.
(d(ii))[3]
Advise the club members on which source of finance would be the most suitable. Justify your answer.
Worked solution & mark scheme
This 25-mark question has a full step-by-step worked solution and mark scheme.