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Difficulty: Very hardCalculation of Accumulated Fund

The following financial positions were extracted from the books of Metro Executive Club as at 1st January 2025:

- Club House (Cost): ₦850,000
- Equipment (Net Book Value): ₦200,000
- Bar Inventory: ₦45,000
- Subscriptions owing by members for 2024: ₦18,000
- Subscriptions received in advance for 2025: ₦12,000
- Accrued electricity bill: ₦7,500
- Prepaid insurance premium: ₦4,000
- Bank overdraft: ₦35,000
- Cash in hand: ₦8,500

What is the value (in ₦) of the Accumulated Fund of Metro Executive Club as at 1st January 2025?

Answer: 1071000 ₦

Answer

The Accumulated Fund of Metro Executive Club as at 1st January 2025 is ₦1,071,000.
The Accumulated Fund is calculated using the fundamental statement of affairs equation: Accumulated Fund = Total Assets - Total Liabilities. Summing all asset items gives ₦850,000 (Club House) + ₦200,000 (Equipment) + ₦45,000 (Bar Inventory) + ₦18,000 (Subscriptions owing) + ₦4,000 (Prepaid insurance) + ₦8,500 (Cash in hand) = ₦1,125,500. Summing all liability items gives ₦12,000 (Subscriptions in advance) + ₦7,500 (Accrued electricity) + ₦35,000 (Bank overdraft) = ₦54,500. Subtracting liabilities from assets yields ₦1,125,500 - ₦54,500 = ₦1,071,000.

Step-by-Step Solution

1
Calculate Total Assets as at 1st January 2025
Total Assets = ₦1,125,500
Assets comprise non-current assets at net book value (Club House ₦850,000 and Equipment ₦200,000), current assets (Bar Inventory ₦45,000 and Cash in hand ₦8,500), accrued income (Subscriptions owing ₦18,000), and prepaid expenses (Prepaid insurance ₦4,000).
2
Calculate Total Liabilities as at 1st January 2025
Total Liabilities = ₦54,500
Liabilities represent amounts owed or unearned income, including income received in advance (Subscriptions in advance ₦12,000), accrued expenses (Electricity bill owing ₦7,500), and short-term bank borrowing (Bank overdraft ₦35,000).
3
Compute Accumulated Fund using the Accounting Equation
Accumulated Fund = ₦1,071,000
For a non-profit organization, the capital equivalent is the Accumulated Fund, calculated as Total Assets minus Total Liabilities: ₦1,125,500 - ₦54,500 = ₦1,071,000.

Key Concept

Calculation of Accumulated Fund via Statement of Affairs for Non-Profit Organizations
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Topics

Calculation of Accumulated Fund

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