Charity law is changing. Click here to find out how the changes will affect your charity.

Charity accounting

This page gives you information on how to prepare your charity's accounts and make sure that they are properly scrutinised.  We've also produced guides to charity accounting and external scrutiny, plus a toolkit to help you get it right.

 It's the law - Accounting Regulations

Remember - it's other people's money that you hold.  It's therefore essential that this is properly accounted for and that the public is reassured.  The Scottish Government has produced accounting regulations that set out how charity accounts must be prepared and checked.  

The Charities Accounts (Scotland) Regulations 2006 set out the format and scrutiny requirements for charity accounts. 

There have been a number of small updates to the Charities Accounts (Scotland) Regulations 2006 and these can be found here.  

Our Guides to Charity Accounts will help you to understand the Regulations and what you need to do.  

Our Receipts and Payments work pack has guidance, templates and sample accounts to help you prepare your accounts in this format.  It is aimed at smaller non-company charities who may not have the means to employ the services of a professional accountant. 

 You must prepare your charity's accounts in one of two ways, depending on the size of its income, its legal form or how its constitution is worded.

  • Receipts & Payments

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

This applies to charities with a gross annual income under £250,000 that are not companies, however, if:

  • your charity's constitution says it should prepare accrued accounts
  • your charity's trustees have taken a decision to prepare accrued accounts, or
  • any enactment says that you should prepare accrued accounts,

then you must prepare accrued accounts even if your charity's gross income would otherwise allow accounts to be produced on a receipts & payments basis.

  • Accruals

Accounts prepared using the accruals basis allocate the costs or income of a particular activity according to when the liability is incurred, or when there is entitlement or certainty about income. This is not necessarily the date on which money is received or paid out. 

The Office of the Scottish Charity Regulator and the Charity Commission for England and Wales are the joint SORP-making body for charities, and we have developed two new Charities SORPs for accounting years beginning 1 January 2015.  You can read more and download a full copy here

For accounting periods starting before 1 January 2015, please read the Accounting and Reporting by Charities: Statement of Recommended Practice (the Charities SORP).

To help you get it right, we have produced guidance about charity accounting and our own reporting requirements: A Guide to Charity Accounts.

The Guide is split in three:

1. The Overview

This Guide is for all charities. It gives an overview of the law regarding charities’ accounts and essential information relevant to all charities. It will help you decide what kind of accounts you need to prepare.  

2. Receipts and Payments Accounts

This Guide is for charities that need to prepare Receipts and Payments accounts.

We also have the Receipts and Payments Workpack which includes guidance and templates.

3. Fully Accrued Accounts

This Guide is for charities that need to prepare Fully Accrued Accounts.

All charities should read Part 1, you will then need to read part 2 or 3 depending on the type of accounts you have to prepare.

Read our Trustees Annual Reports: Good practice and guidance that explains what a trustees’ annual report is, what the law says it must contain and how you can use it to benefit your charity. 

Read our Incorporation to SCIO: Accounts factsheet for more information on the accounting requirements when incorporating to a SCIO.

Any parent charity where the gross income of the group (the parent charity and its subsidiaries) is £500,000 or more after consolidation adjustments, must prepare group accounts.

However, where a charitable company is required by section 399 of the Companies Act 2006 to prepare group accounts, those group accounts are prepared under the Companies Act 2006, as well as under charity law and the accounting regulations. 

The Office of the Scottish Charity Regulator and the Charity Commission for England and Wales are the joint SORP-making body for charities, and we have developed two new Charities SORPs for accounting years beginning 1 January 2015.  You can read more and download a full copy here

For accounting periods starting before 1 January 2015, please read the Accounting and Reporting by Charities: Statement of Recommended Practice (the SORP 2005) for further details.

Your charity's accounts must be externally scrutinised. That is, someone who is independent of your charity must review the accounts and produce a report, attached to the accounts, that highlights any issues to the reader.

Choosing the right form of external scrutiny

The type of external scrutiny you choose depends on your charity's governing document, gross income and net assets and whether or not your charity is also a company.

To understand what form of external scrutiny is required for your charity's accounts, see Section 3 The external scrutiny of charity accounts

There are two recognised forms of external scrutiny:

Independent examination

An independent examination looks at a charity's accounting records and annual accounts and considers whether the accounts are a fair reflection of the underlying records. It provides a degree of comfort to the reader that the figures in the accounts and the Trustees' Annual Report present an accurate picture of the financial activity of the charity for the accounting period.

Consideration is also made of any unusual items in the accounts that may require further discussion or an explanation from the charity trustees.

Read our Guides to Independent Examination for further information.  You can choose to view the guidance in full or read specific sections which have been written with particular groups in mind.


Under the accounting regulations, if the term 'audit' is used in your charity's constitution or governing document, you must have your accounts audited by either:

  • a registered auditor
  • the Auditor General for Scotland
  • an auditor appointed by the Accounts Commission for Scotland (responsible principally for public bodies).

Audits are more commonly required for larger charities, although smaller charities may also have to have an audit if this is stated the in governing document or through a decision made by the charity trustees.

Our guidance for charities and independent examiners sets out the legal requirements and best practice. 

The example accounts we've published here are intended to show you how to prepare compliant accounts according to various circumstances.  We've included examples that meet the requirements of the two charity Statements of Recommended Practice (SORPs). 

You can find further information on the charity SORPs on the SORP micro site.

Receipts and Payments accounts

Fully Accrued accounts

SCIO accounts

Scottish limited company group accounts prepared under SORP FRS102.

Unincorporated Association accounts 

Scottish limited company group accounts prepared under SORP FRSSE.

Receipts and Payments Workpack

Scottish unincorporated accounts prepared under SORP FRS102.


Scottish unincorporated accounts prepared under SORP FRSSE.


Example accounts for an independent school.


Auditors and Independent Examiners in Scotland, England and Wales and Northern Ireland have a common statutory duty to report matters of material significance to the charity regulators.

OSCR, the Charity Commission for England and Wales and the Charity Commission for Northern Ireland have agreed a common list of matters of material significance to assist the auditor and Independent Examiner in reporting important matters on a timely basis.

The charity regulators have prepared guidance to accompany the common list of matters and auditors and independent examiners should ensure they are fully conversant with the guidance.  

In addition to the duty to report matters of material significance to the charity regulators, there is also a discretionary right for auditors and independent examiners to report to the regulator any matters that they believe may be relevant to the work of the regulator.

The UK charity regulators have prepared guidance to assist auditors and independent examiners in understanding when they can usefully use their discretion to report relevant matters of interest to the regulators.  OSCR is keen to encourage such reporting because it provides useful information on significant issues facing charity trustees and gives OSCR an opportunity to provide advice and guidance to charity trustees or to make a timely regulatory intervention if this is judged appropriate to the charity’s circumstances.  

To compliment our charity accounting guidance, OSCR has produced webinar presentations where an expert provides an overview of certain aspects of charity accounting. You can view these webinars below. There are more videos from OSCR on our YouTube channel.

Charity accounting webinar 1: Overview of charity accounting rules

In this presentation, OSCR's Head of Professional Advice and Intelligence Laura Anderson gives an overview of charity accounting rules for Scottish charities.


Charity accounting webinar 2: Receipts and payments accounts

OSCR's Head of Professional Advice and Intelligence, Laura Anderson, provides an overview of receipts and payments accounts.


Charity accounting webinar 3: Accrued (SORP) accounts

In this video, OSCR's Head of Professional Advice & Intelligence, Laura Anderson, discusses:

  • Accrued accounts - accounts that record all the transactions of the charity in the financial year
  • The Charities Statement of Recommended Practice (the SORP) - the set of rules which governs charity financial reporting and accounting for charitable companies and larger charities with an income of £250,000 and more.


Charity accounting webinar 4: External scrutiny of accounts

In the fourth episode of our charity accounting series, OSCR Head of Professional Advice & Intelligence Laura Anderson discusses external scrutiny of charity accounts.



Restricted funds are donations which have been given to your charity for a specific purpose – sometimes to deliver a special project or a distinct piece of work or to be used only for one of your charitable purposes if you have more than one.  The person or organisation giving those funds to your charity has done so trusting that you will use the funds for that reason and no other.  However, sometimes it is possible to use the funds for a different purpose (like in the COVID-19 crisis) if you are able to contact the donors to ask them.   It is important for charity trustees to consider whether this is the right thing for the charity in terms of other commitments that the charity has already – for example, contractual commitments both short and longer term.

Sometimes restricted funds comprise donations from many donors and in this situation it is unlikely to be practical to contact them all to ask permission to use the funds differently. Where the charity trustees consider it appropriate in the circumstances, they may wish to think about using their normal methods of communication such as newsletters or their website to inform those donors that they are proposing an alternative use for those funds providing no objections are raised within a set period of time.

If the restricted fund has been created by a single donation and it is not possible to contact the original donor or funder to discuss alternative use then you should not use those restricted funds as there is no means of the charity trustees addressing the trust that the original donor placed in the charity.  

We encourage charities that are looking at options for using restricted funds to be sure that the funds are definitely restricted and not designated as the two are quite different. 

  • Restricted funds occur where a third party has placed a restriction on the use of the fund.
  • Designated funds are where the charity trustees have chosen to set aside some of the unrestricted funds of the charity for a specific use – for example a repair fund to ensure there is money available to keep a building in good condition.

If charity trustees are in doubt, they should consider the paperwork that they have to support the restriction. Auditors and independent examiners to charities may also be able to assist with some of this as they will have had an interest in ensuring the funds are correctly described in the charity’s accounts and so may have copies of supporting documentation on their files.