GCE Accounting 2022 Theory — Question 3

Model answer

(a)(i) Accumulated Fund: this is the fund that corresponds to the capital of a partnership or sole trader in a non-profit-making organization; it is calculated using a statement of affairs and represents the excess of assets over liabilities at the start of the trading period, taking the place of capital. (a)(ii) Statement of Affairs: this is an account typically prepared to show the details of an organization's assets and liabilities, giving an overview of its financial position, similar in purpose to a balance sheet. (b) Sources of income for non-profit making organizations: 1. Subscriptions - periodic contributions from members to the association or society 2. Entrance fees - money paid on application for membership 3. Donations - gifts of money or otherwise from members or outsiders 4. Bar takings 5. Rent received 6. Profit on bar / sale of competition prizes (c) Differences between Receipts and Payments Account and Income and Expenditure Account: 1. Receipts and Payments Account only records cash transactions, whereas Income and Expenditure Account is adjusted for accruals and prepayments. 2. Receipts and Payments Account includes capital items, whereas Income and Expenditure Account excludes capital items. 3. The balance on a Receipts and Payments Account represents cash in hand or at bank (it is a real account), whereas the balance on an Income and Expenditure Account represents a surplus or deficit (it is a nominal account).