Types of charity accounts

A charity may prepare either receipts and payments accounts or accruals accounts. Which of these is needed will depend on the income of the charity and whether or not it has been set up as a charitable company.

Receipts and payments accounts

This is the simpler of the 2 methods of accounts preparation and may only be used where a non-company charity has a gross income of £250,000 or less during the financial year. Receipts and payments accounts contain a statement summarising all money received and paid out by the charity in the financial year, and a statement giving details of its assets and liabilities at the end of the year. Charitable companies are not allowed by company law to adopt this method.


Non-company charities with gross income of over £250,000 during the financial year, and all charitable companies must prepare accruals accounts that comply with the applicable Statement of Recommended Practice (SORP). The SORP to follow will depend upon the charity’s financial year. Accruals accounts contain a balance sheet, a statement of financial activities and explanatory notes. These accounts are required in accountancy terms to show a ‘true and fair view’.

Audit or independent examination?

Except for certain NHS charities and where the charity’s governing document requires some form of external scrutiny, only charities with a gross income of more than £25,000 in their financial year are required to have their accounts independently examined or audited.

The type of scrutiny required depends on the income and assets of the charity. Broadly speaking, an independent examination is needed if gross income is between £25,000 and £1 million and an audit is needed where the gross income exceeds £1 million. An audit will also be needed if total assets (before liabilities) exceed £3.26 million, and the charity’s gross income is more than £250,000.

Fisher & Co. will discuss this further in our third Charity Blog.