Question

d. Ben Quayson Social Club has 160 members who contributed an amount of GH¢ 150 each as Life membership fee on 01/01/2017. One tenth of the Life membership fee is charged to Income and expenditure account each year. But when a member dies, the whole amount is transferred to income and expenditure account. Unfortunately, 8 members died in 2017 and 10 members were enrolled in 01/01/2018. Ben Sarpong, the Accountant is confused on how to treat the fees. The club prepares account to 31st December each year. Required Show how Ben Sarpong should treat the Life membership fee in the financial Statements of Ben Quayson’s Social Club for 2017 and 2018 years.

d. Ben Quayson Social Club has 160 members who contributed an amount of GHe 150 each as Life membership fee on 01/01/2017. One tenth of the Life membership fee is charged to Income and expenditure account each year. But when a member dies, the whole amount is transferred to income and expenditure account. Unfortunately, & members died in 2017 and 10 members were enrolled in 01/01/2018. Ben Sarpong, the Accountant is confused on how to treat the fees. The club prepares account to 31" December each year. Required Show how Ben Sarpong should treat the Life membership fee in the financial Statements of Ben Quayson's Social Club for 2017 and 2018 years. 10 marks (Total: 40 marks)

Answer 1

-Life membership fees is a capital receipt, because the organization will have to provide the service to the member for the whole life against the life membership fees. It willbe recorded as a liability in balance sheet and a fair portion will be transferred to Income & Expenditure account every year as an income.

Life Membership fees Account
Date	Particulars	Debit	Date	Particulars	Credit
31.12.2017	Income & Expenditure account*	3480	01.01.2017	Bank(160*150)	24000
31.12.2017	Balance C/d	20520
		24000			24000
31.12.2018	Income & Expenditure account*	2,430	01.01.2018	Balance B/d	20,520
31.12.2018	Balance C/d	19,590	01.01.2018	Bank(10*150)	1500
		22,020			22,020

* Amount to be transferred To income & Expenditure account in 2017
8*150	1200
152*150*1/10	2280
Total	3480
* Amount to be transferred To income & Expenditure account in 2018
20520*1/9	2280
10*150*1/10	150
Total	2430

In 2017-

• 24000 should be treated as receipt of Life member ship fees
• 3480 to be transferred to Income and expenditure account as income
• balance 20520 to be shown as liability in Blalance sheet.

In 2018-

• 1500 should be treated as receipt of Life member ship fees
• 2430 to be transferred to Income and expenditure account as income
• balance 19590 to be shown as liability in Blalance sheet.