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Source A for Question 1

AA Social Club’s financial year ends on 31 December. It also runs a café for its members. The mark-up
of the café is 50%. The balances of some accounts are shown as follows:

31 December 31 December
2023 2022
$ $
Club equipment
cost ? 335 000
provision for depreciation ? 144 000
Café equipment
cost ? 36 000
provision for depreciation ? 26 000
Café inventory ? 11 200
Café trade payables 29 800 23 600
Subscriptions
owing 5 600 4 800
prepaid 3 200 4 000
Club expenses
accrued 3 900 –
prepaid – 5 800

The treasurer also prepared a summarised bank account for the year ended 31 December 2023.

Summarised bank account

$ $
Balance b/d 45 700 Café suppliers 172 000
Café receipts 212 000 Subscription refund 1 600
Subscriptions 336 000 Club equipment 25 000
Café equipment 4 500
Club expenses 274 000
Balance c/d 116 600
593 700 593 700

All the café sales are on a cash basis.

The following information is also available for the year ended 31 December 2023.

1 On 31 December 2023, the café section of the club was broken into. Some cash was stolen.

2 After paying the café wages of $34 800 and café expenses of $15 500, the remaining cash was
banked. The cash register recorded that the total cash sales for the year were $264 000.

3 Subscriptions of $2400 owing at 31 December 2022 were irrecoverable. Subscriptions of $1600

prepaid at 31 December 2022 were fully refunded because some members did not renew their
membership.

4 Club equipment is depreciated at 15% per annum using the reducing balance method. Café
equipment is depreciated at 20% per annum using the straight-line method. A full year’s
depreciation is provided in the year of purchase and none in the year of disposal.

5 A coffee machine in the café, purchased in 2020 for $3000, was damaged. It is to be written off.

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1 Read Source A in the insert.

(a) State two differences between a receipts and payments account and an income and
expenditure account.

Receipts and payments account Income and expenditure account

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(b) Prepare the café’s statement of profit or loss for the year ended 31 December 2023, showing
the value of stolen cash in the expenses section.

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Workings:

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(c) Prepare the Club’s income and expenditure account for the year ended 31 December 2023.

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Workings:

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Additional information

The committee members want to improve the security of the club. They have two options.

Option 1 Installing a security system at a cost of $120 000, followed by an annual maintenance
fee of $1000.

Option 2 Recruiting a daytime security guard at an annual salary of $30 000.

(d) Advise the committee members which is the better option. Justify your answer.

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[Total: 25]

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