Balancing end of year charity accounts

mookev

This is my 1st year as treasurer for a local motorcycle club which is registered as a charity. I am preparing the end of year accounts. My questions are these:-


1.When producing the balance sheets for the year, do I use the bank account balance from the bank statement or from the Microsoft money program I am using for the accounts? This is important as on Money, I have an outgoing payment to the information commissioner of £35 shown going out on 26/2/2014 which was only presented to the bank on 11/3/2014. on the accounts last year this was shown as a liability when the balance was done. I assume therefore that this year, I include it in this years expenditure and work from the balance shown on the bank statement rather than from the Microsoft money balance at the end of the previous financial year?
2. basic question, to which I am sure I know the answer already, but can you confirm that:-
Current Assets (debtors) is money that you have recorded as received but haven't yet paid in the bank or hasn't shown on the statement at the end of your financial year? and..
Current Liabilities (unpresented cheques) are cheques that have been written to pay for items but as yet haven't appeared on the bank statement at the end of the year?


Thanks for your help
mookev

SeduLOUs

The bank account on the balance sheet should reflect the current committed balance, so unpresented cheques/receipts should be added/deducted from it. You should keep a schedule of these for future auditing purposes to explain the difference between the bank statement and the balance sheet figure.

Where the expenditure to the ICO lies depends on the period to which it relates. If it's an arrears payment for last year, it should be in last year's accounts. If it's paid in advance for the following year it should be sitting in a prepayments account on the balance sheet to be released when appropriate - £35 probably doesn't matter either way, but the same gist applies to large payments too.

The profit and loss for a period should reflect the income and expenditure that was actually generated in that period - not necessarily what invoices were issued and received or paid in that period. Your accruals for example would be any goods or services you have 'used' prior to the year end which you haven't yet paid or been invoiced for, and the double entry of these balance sheet accruals is you deducting the cost from profit. The accrual is reversed when the actual invoice is received.

Perhaps you would be better with Sage Instant Accounts or similar, as MS Money is a more of a cashflow than an accounts tool and won't allow you to prepare 'proper' management accounts (if that is what you are trying to achieve).

purdyoaten

mookev wrote: »

2. basic question, to which I am sure I know the answer already, but can you confirm that:-
Current Assets (debtors) is money that you have recorded as received but haven't yet paid in the bank or hasn't shown on the statement at the end of your financial year? and..
Current Liabilities (unpresented cheques) are cheques that have been written to pay for items but as yet haven't appeared on the bank statement at the end of the year?


Thanks for your help
mookev

Debtors -No - it is money that you have earned but have not yet been paid for. What you have indicated should be shown as an outstanding lodgement on your bank reconciliation.

Creditors - Definitely not! Cheques should be treated as described by sedulous - oustanding cheques on your bank reconciliation. Creditors are people to whom you owe at year end but have not yet paid.

zygurat789

purdyoaten wrote: »

Debtors -No - it is money that you have earned but have not yet been paid for. What you have indicated should be shown as an outstanding lodgement on your bank reconciliation.

Creditors - Definitely not! Cheques should be treated as described by sedulous - oustanding cheques on your bank reconciliation. Creditors are people to whom you owe at year end but have not yet paid.

Either one of which may include the bank/overdraft balance

mookev

Thank you both for your earlier replies. Just to clarify that I am doing this correctly, I am using the balance from the BANK STATEMENTS on the last day of my financial year i.e. 28th February for 2014 and for 2015 ( rather than the balance from Microsoft money where I record when cheques are written and posted etc.). We are owed nothing and the only outstanding cheque was written and posted on 18th February 2015 and was cashed by the recipient on 2nd march 2015 i.e in the next financial year. This cheque also was for renewal of our data protection registration until March 2016 so it is for a service in the next financial period and therefore should not be included in this balance or in the income and expenditure sheet for 2014-2015? Can you confirm this?


thanks mookev

SeduLOUs

No. If you're doing it properly the bank balance on the balance sheet should have the cheque amount deducted as you have committed to the payment at that point even though it hasn't yet cleared.

Unpresented/outstanding receipts doesn't mean money you are owed - it would be things like be cheques that you have banked but the balance hasn't yet cleared to your account.

Money owed to you (if relevant) would be a debtor under assets on the balance sheet, and any money that you owe is a creditor under liabilities. You should also have accrued income/expenses for any work/items provided or received or any work in progress in the period that have not yet been invoiced.

The expenditure to the ICO should be sitting in a prepayments category under assets on the balance sheet - it is an 'asset' in accountancy terms as you have already paid for it and therefore it needs to be accounted for, but it should not be showing as an expenditure in the P+L yet as the expenditure doesn't relate to the current period. It should be journalled out of prepayments and posted to expenditure in next year's accounts.

Realistically though, it will be very difficult for you to do this properly using only MS Money and without a fundamental understanding of nominal accounts, accruals/prepayments and double entry - even then it would be very difficult to manage on paper. If you want to produce accurate balance sheets and profit/loss accounts you need an accountancy package.