Income and Expenditure Accounts
Income and Expenditure Accounts (also sometimes called Receipts and Payments Accounts) - are the simplest format for annual accounts. They record exactly what money your group has had coming in (income or receipts) and what has gone out (expenditure or payments) over the 12 month period of your financial year, and reconcile this to the opening and closing bank and cash balances held by the group.
Which groups should prepare Income and Expenditure Accounts?
Simple Income and Expenditure accounts are usually best suited to unincorporated groups not subject to any statutory regulation.
Unincorporated charities with an annual income under £250,000 can also prepare a form of income and expenditure account. However, they must follow a particular form with specific content that is set out in Charity Law.
Incorporated groups are required by Company Law to prepare accrued accounts rather than Income and Expenditure (or Receipts and Payments) accounts.
What to include in Income and Expenditure Accounts
Income and Expenditure Accounts can be presented in a number of different ways, but will usually comprise of a statement that:
includes the name of the group and the period covered by the accounts
summarises the financial transactions carried out over the year - the categories of income and expenditure used will be those most appropriate for your particular organisation.
discloses the difference between the income and expenditure. If you paid out less than you received, the difference will be a surplus. If you paid out more than you received, the difference will be a deficit.
discloses the cash and bank balances at both the start and end of the year
reconciles the income and expenditure to the movement in the cash and bank balances. The opening balances plus the income minus the expenditure will equal the closing balances.
includes the corresponding figures for the previous year for the purpose of comparison.
Adopting your Accounts
Once prepared, your Annual Accounts should be approved by the Committee before being presented to your members at your Annual General Meeting.
The constitutions of many groups or organisations will also require the accounts to submitted to some form of external scrutiny before being presented to the members at the Annual General Meeting (AGM). This should be done after they have been approved by the committee. However, you may want to involve whoever is examining the accounts before the committee approves them so that if they require changes they can be made without calling another committee meeting.
If your group is an Unincorporated Association without charitable status there is no statutory obligation to submit your Accounts to a regulatory body. However, you may be required to submit your Annual Accounts to a funder as part of the conditions of grants received during the financial period in question.