Wealth through conventional investment principles

Book of accounts

Book of accounts

The club is dealing with the money of its members and the club is operated as a focus business, working for a healthy return on its invested capital.

A complete set of proper accounts is therefore required to record every transaction of the club and to account for the shareholding of each member.

The following minimum set of accounts is required:

The cash account

This account records the movement of money (in / out) of the club’s bank account / share investment account.

The following transactions have to be recorded:

  • Monthly investment amounts paid into the account by members (+)
  • Dividends received from investments (+)
  • Interest earned on un-invested cash / cash not yet used to buy shares (+)
  • Cash generated from the sale of shares (+)
  • Cash used to purchase shares (-)
  • Withdrawal on money from the investment club (-)

It is important that every transaction of the investment club is recorded and all amounts are reconciled with the bank statement / share investment account

Capital account

This is a statement which reflects the total number of investment units of the club as well as the number of units owned by each member of the club. The statement will also reflect the date and price at which members bought and sold units. The following information has to be recorded.

  • The number of units each member held at the end of the previous month
  • The value of units in the current month
  • The number of units bought and sold by each member during the month
  • The number of units each member held at the end of the month

The asset register

The assets of the club will at any point in time consist of a combination of shares (shares bought with the available cash) plus cash in the club’s account (un-invested cash / cash not yet used to buy shares). The value of the investment will be determined by the price of the shares (owned / held by the club) at any particular point in time, interest earned on the un-invested cash in the account plus dividends received from shares the club is invested in.

The asset register is a statement of the shares and cash which the investment club owns on a particular date (usually end of month).

The cash should match the Investments club’s bank statement / share investment account and the shares should match the share portfolio holding available from the club’s online share investment account.

Allocation of gains to members for the purposes of personal income tax

Accurate records have to be kept of the club’s dealings in shares. Any gains / taxable amounts (capital gains / losses, dividends, interest on un-invested cash and income) has to be allocated to members in accordance with their individual percentage shareholding of the clubs portfolio.

The stake (percentage shareholding in the club) of members will vary from month-to-month as a result of new amounts invested and partial withdrawals by members. All taxable amounts (capital gains / losses, dividends, interest on un-invested cash and income) will for this reason have to be allocated to members, proportionally in accordance with their shareholding in the club, using the date of the transaction that resulted in the taxable amount.

An accounting system which will allocate amounts to individual member as per the requirements set out above (allocate proportionally using the date of the transaction) has to be implemented and kept up to date.

Role of the club treasurer

The treasurer will be responsible for keeping a record of the investment club’s dealings in shares, which includes the investment club’s holdings as well as each member’s share. The books of accounts shall be kept and be available and open to inspection and examination by any member of the club.

Role of the club’s internal auditor / good governance

The accounting requirements of the club is quite comprehensive and the accounting has to be 100% correct and up to date at all times. The internal auditor is therefore required to ensure that the following is strictly complied with:

  • Check and confirm that the agreed set of accounts / books are kept and that it is correct and always up to date
  • Confirm that the business of the club is conducted strictly in accordance with the “agreement and rules” of the club
  • Assess and confirm that the measures implemented by the club to safeguard and protect the club’s accounts and related information (electronic data) are strictly adhered to and are adequate