Accounting for charities is very important as they’re handling the money of the public. Donors have the right to know how their donated money was spent. Above all, charity accountants should be aware that business and charity accounting is not the same. Some laws and regulations must be followed when accounting for charities. In charity accounting there are four different types of funds:
- Unrestricted funds: these are funds that charity trustees can use for their personal use
- Designated funds: these are unrestricted funds that trustees have put aside for a specific purpose
- Restricted funds: these are funds given to a charity for a specific purpose and must be used for that purpose
- Endowment funds: these are funds given to a charity representing capital. Funds like these are to be invested or used for other charitable affairs
It is important to distinguish between all four of these funds especially when managing the finances of the charity. More specifically the unrestricted funds and the restricted funds. Failure to use the restricted funds for the requested purpose would lead to a breach of trust.
- Bookkeeping – keeping a record of all transactions and accounts
- Account review and preparation – go over the annual return
- Tax advice – shares knowledge on solving complex tax issues
- Strategy support – provides tips on how to manage accounts
- Filing at charity commission & companies house- submission of annual return
At the end of your financial year, charities are required to submit their annual return to the Charity Commission. This can be done individually or more easily by an accountant. An annual return needs to be submitted by charities if their annual income is between £10,000 and £25,000. Therefore, charities that get an income below £10,000 are only required to submit a report of their income and spending.
How Can We Help?
Here at Carrington Blake Accountancy, we offer a wide range of services for charities. Our services range from; bookkeeping, management accounts and reports, charity taxation and VAT, charity gift aid and annual statutory accounts and annual returns.