Which rung of the ladder are you on?
UK charity reporting scales with income, and the two thresholds that matter most are these (England & Wales; Scotland via OSCR and Northern Ireland via CCNI differ in detail):
- Under £250,000 income and not a company: you can usually prepare simpler receipts-and-payments accounts.
- £250,000+ income, or any charitable company: you must prepare accruals accounts under the Charities SORP (FRS 102).
- Scrutiny: an independent examination is generally required once income exceeds £25,000; a full audit is required once income exceeds £1 million (or gross assets exceed £3.26m and income exceeds £250,000).
Knowing your rung tells you what accounts to prepare, who must scrutinise them, and what the SORP expects. The full guide walks each, plus the trustees' annual report and fund accounting — the two things new charities most often get wrong.
Receipts-and-payments vs accruals
Receipts-and-payments is essentially a summary of cash in and cash out plus a statement of assets and liabilities — permitted for smaller non-company charities under £250,000 income. Simple, and fine at that scale.
Accruals accounts under the SORP match income and costs to the period they relate to (not just when cash moves), and follow the Charities Statement of Recommended Practice. Required for charitable companies (of any size) and any charity over £250,000. They comprise a Statement of Financial Activities (the charity world's version of a profit-and-loss, but organised by fund and activity), a balance sheet, cashflow (for larger charities) and detailed notes.
The scrutiny ladder
- Under £25,000 income: generally no external scrutiny required (though your governing document might ask for one).
- £25,000–£1m income: an independent examination — an independent review, lighter than an audit. Over £250,000, your examiner must be suitably qualified.
- Over £1m income (or assets over £3.26m and income over £250,000): a full statutory audit by a registered auditor.
- Always check your governing document — some require an audit regardless of size, and some funders demand one contractually.
We prepare SORP accounts and can act as independent examiner where appropriate; where a registered audit is required we coordinate it so nothing falls between stools.
The trustees' annual report (TAR)
Not an afterthought — for many readers (and funders) it's the most-read part of your accounts. It must explain your purposes, what you did to achieve them, your achievements and public benefit, and (for larger charities) your reserves policy, risks and plans. A strong TAR is a fundraising asset; a thin one is a red flag. We help you tell the story the numbers support.
Fund accounting: the concept that trips everyone
Charities don't have one pot of money — they have funds, and mixing them up is a governance failure:
- Restricted funds — given for a specific purpose (a grant for a youth project). You may only spend them on that purpose. Spending restricted money on core costs is a breach, even if you're broke.
- Unrestricted funds — general funds you can use for any charitable purpose, including keeping the lights on.
- Designated funds — unrestricted money the trustees have earmarked for a plan; still legally unrestricted, but signalled.
Your accounts must show movements on each fund separately. Standard small-business software like FreeAgent isn't built for fund accounting, so for charities that need it we set you up the right way — keeping fund-coded records through the year (in appropriate software, or a structured system we maintain) so year-end is a review, not archaeology, and funder reports become a by-product.
The reserves question Trustees are expected to set a reserves policy — how much unrestricted money to hold against risk — and justify it. Too little looks reckless; too much looks like hoarding to funders. There's no magic number; there's a defensible one for your risk profile, and we help you land on it. (See our blog on
reserves policies.)
Getting it right
The pattern is always the same: the charities that find year-end painless kept clean, fund-coded records all year. The ones that dread it treated bookkeeping as a January job. Our sector packages include the right bookkeeping setup for your structure (FreeAgent for CICs and company-style social enterprises; appropriate fund-accounting software for charities that need it), SORP-aware accounts preparation, and independent examination where it fits — from £39 + VAT a month.
