bookkeeping for a charity - The Book-keepers Forum (UK)

stephen72 · Senior Member

bookkeeping for a charity

Shamus · Forum Moderator & Expert

Hi Stephen,

Congratulations on gaining a client.

All that I can offer on this one is the basic text book stuff.

The basic principles are the same even though the terminology is different.

Generally the charity would keep a receipts and payments account which is basically a trial balance.

Instead of Profit and Loss it's an income and expenditure statement. At the bottom of this it will state Surplus/deficit for the year rather than profit or loss.

In the Balance sheet :

Subscriptions due are a type of prepayment (but include only if certain to be received)
Subscriptions in advance are a type of accrual.
Instead of a capital and reserves account it's an Accumulated fund.

Hope this helps,

Shaun.

stephen72 · Senior Member

Hi Shaun,
Thank you for your comments.I just wasn't sure if i needed to do anything drastically different as it was a charity.Even though it i just a one off i am going to do it for them .

semsley · Guru

It doesn't affect the book-keeping really much at all but it does affect the production of accounts as SORP has to be followed, and you have to file with both Companies House and the Charities Commission by extracting bits from the accounts to complete the Charities Commission Annual Return.

If the charity has both restricted and unrestricted funds you will need to account for these separately. In Sage I use Depts and in QB Classes.

BackOfficeGroup · Guru

From the bookkeeping side of things, no main differences really. The returns are a bit of a pain as Semsley says and the accounts are easy too, so long as you follow the correct procedures.

I was a Treasurer for a charity for 10 years and never changed the way I worked. If they are VAT registered, there are some exemptions too.

P

Ann-marie · Senior Member

Hi,

Yes all good points, I currently work as the Finance Manager for a charity so if you have any queries i'll be glad to help out.

Ann-marie

stephen72 · Senior Member

Hi ,
Thank you all for your advice as always it has been a great help.
stephen

Kris1 · Member

Hi Stephen,

I currently work for a charitable company.

There are many different things to consider with a charity, firstly all charities are subject to submistting their reports to the ICC.

The Commission give excellent advice on what type of accounts you should be keeping. For example a charitable company need to use the accruals method of accounting, and not just an income and expenditure method. Dependant on their turnover they also have a balance sheet which needs construction for statutory accounts, not just the info we pull off Sage.

They are also required to provide a SoFA, Statement of Financial Affairs, and a trustee's report is required. If you have an email address I will send you the forms required by the ICC as an excel attachment.

You may want to consider their income streams (and whether they are vatable.) If they are the partial exemptions rules may apply to reclaiming VAT on purchases.

Certain charities may only require the option to be auditted by a nominated accountant, others, again dependant on factors like turnover will be required to be auditted by the charities commission.

the best thing you can do is have a look at SORP (Standards Of Recommended Practice) and the Charities Commission website for the type of client you are dealing with.

If you have any queries please let me know, and I will be happy to help.

Kris

CharityBookKeeper · Newbie

The day to day book-keeping and accounting for charity is basically same like a business but the annual accounts makes all the difference. To make sure that annual accounts are prepared with less time, you need to structure charity books slightly diffrent way. Project accounting i.e tracking all income and expenditure by projects is a crucial aspects in a charity. This enable them to report to donors properly which is a lifeline in any charity.

Another aspect, you should be aware that decision making process in a charity is slower as governance structure are usually more complicated than a similar size business. In our expereince, we found that book-keeping in a charity does not take more time but the time to satisfy and interaction with various stakeholders in a charity is often more time consuming.

Charity Accounting Services

ssh · Newbie

Hello,
I'm a novice in this field my local charity contacted me to help in setting up their accounts using Paxton software. Has anyone used this for charity bookkeeping I have queries on balance sheet figures. Can anyone help please?

Thanks,

AngelaWBS · Senior Member

Hi Sony,

Welcome to the forum.

I use Paxton software for a charity I work for. What is you question regarding the balance sheet?

Hopefully I can help!!

Regards

ssh · Newbie

Hi Angela,
Thanks for your reply. I have finally managed to put all figures right on the BS.
However I have few other questions I found it really difficult to add Bank transactions (debit/credit in bank statements) the accountant gave me a bank statement and asked to enter this on to the system (Paxton) but there is no option for that. Should I use Income/Expenditure booking and then reconcile it with the Bank Statement?
Sorry it sound like a daft but I have no prior knowledge just learning as I do it.

Thanks,
Sony

john Boy · Veteran Member

on a related topic what is a statement of affairs within a charities accounts?

AngelaWBS · Senior Member

Hi Sony,

Yes put your debit/credit transactions from the bank statement in via income/expenditure booking, unless any of your income is from donors then they need to be entered in the donor bookings. Then you can do a bank rec.

Regards

ssh · Newbie

Thanks Angela , that was really helpful.

ProBowlUK · Senior Member

I'm expecting to be elected Chair of a local charity.

I understand that Grants and Donations are often given with "specification" for it's use.
How is the bookkeeping done to ensure the Accounts can prove the specification has been followed and whatever is remaining of that Grant/Donation ?

semsley · Guru

Grants are normally what are called Restricted Funds and are for specific purposes over a given timeframe. To account for them you need to keep all the expenditure separate from Unrestricted Funds (earned income). How you do this depends on whether you are using computerised or manual accounting systems.

For example in Sage you can give each Grant/Fund a Department and post all expenditure to the relevant nominal codes. In Quickbooks you can set up Classes and again assign a class to fund and post the item of expenditure to that class.

These are the only two computer progs I use so I can't give advice on any other.

Life_is_too_hard · Newbie

Sorry for bumping an old thread.

I'm going to be taking a voluntary role as a treasurer for a charity this week but I'm still confused about a few things because I'm useless like that.

Project/event accounts: Are these effectively their own ledger/fund? e.g if it were a manual system there would be overhead accounts, a rent account, staff expenses accounts etc under this ledger, and will there be a set budget derived from total restricted funds? Would this budget have it's own account within a ledger? Can someone explain for an idiot what cost allocations and apportionments are and what bearing they have on project accounting?

Should I be concerning myself with trustee reports, and could someone show me a good example of one?

Finally can someone help me to understand the gift aid process and which documents are needed?

The charity is non profit by the way.

Thank you in advance, and please be gentle I've only ever trained to do the books for sole traders.

stephen72 · Senior Member

Hi, I was a bit nervous about starting to do the work for the charity at first but once i got started it was just like a normal client . They used sage for the accounts i am not sure what software you will be using but what i did should be transferable to anything really.
I created nominal codes for both income and expenditure for all of the different groups that used the charity so that it was easier to input but we also input the budgets into sage and at the end of each month you could see the budgets and the variances and this would be used to produce the directors reports .
i found that after all of the hours spent compiling trustee reports that most of the trustees were not that bothered about them they were only concerned about how much money was left in the bank at the time of the report.
As far as rent and overheads go the budgets were set at the start of the year using the previous years figures with a bit added on and some were just pure guesswork but they just went into the usuall nominal codes for rent,electricity etc and were compared at the end of the month against the budget .

Not sure if this is much help to you but i think the best thing to do is to just set things up in a way that makes sense to you and you will find that you will make changes along the way that you need make .

stephen

Life_is_too_hard · Newbie

That's great, but I still need to know about project accounting; I'm only bringing it up because over on the ICB forum someone's claiming you need to know about this. Would it help to set up departments for individual projects or events assuming they have the right software, and how would these departments affect the accounts? I should know but it's a long time since I used Sage 50, and departments weren't covered when I trained on Sage Instant.