Section 2 What are receipts and payments accounts?

Published: 18/04/2019
Updated: 18/04/2019

Receipts and payments accounts are created using a simple form of accounting that summarises all monies received and paid via the bank and in cash by the charity during its financial year, along with a statement of balances.

The closing bank balance to report in the accounts should be:

·       The balance at the bank on the last day of the financial year.

Plus

·       Any money received before the end of the year but only banked in the following year.

Less

·       Any cheques written before the end of the year but not cleared through the bank until the following year. 

The main differences between receipts and payments and fully accrued accounts are that:

  • in receipts and payments accounts no adjustments are made for the timing of the income or payments to bring them in line with the period to which they relate. So, for example, if a charity pays its rent in advance just before the end of the financial year, the payment will be recorded in the accounts of the year it was actually paid, rather than in the year to which the payment relates.

  • the purchase or sale of assets for cash would be included in the receipts and payments accounts as a payment or a receipt in the reporting period. Assets owned by the charity should be shown separately on the statement of balances for information.

  • changes in the value of assets are not included in receipts and payments accounts.

Formal accounting standards are primarily concerned with ensuring that accounts show a true and fair view of a charity’s financial affairs do not apply to receipts and payments accounts.

However, the receipts and payments accounts must give sufficient detail to enable a reader to gain an appreciation of the transactions of the charity and of any surplus or deficit.

Can my charity prepare receipts and payments accounts?

Non-company charities with a gross income of less than £250,000 can prepare accounts on a receipts and payments basis unless:

  • the governing document
  • any law or
  • a decision of the trustees
  • any third party requirements, for example a funder

requires the charity to prepare fully accrued accounts.

Charitable companies, registered social landlords, community benefit societies (CBS or Bencom) and further and higher education institutions cannot prepare accounts on a receipts and payments basis.