Good evening
I've been tasked with typing a charity's income & expenditure sheet for year end 2014 while casting my beady eye on the figures.
At the bottom, it shows receipts and payments represented by
Opening Balance and a Closing Balance
I take this to be the balance of bank accounts, which when I checked through prior year bank statements, the opening balance (yr end 2012) is correct.
However the closing balance for 2013 is way out (as in £82,000) out. Am I missing the point here? And if these figures do relate to the bank balances, should I type the wrong opening balance or the true balance?
Thanks in advance
Pauline
Replies (11)
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Are there other assets?
The income and expenditure account should reveal an increase in cash generated during the year.
If the only asset the charity has is the bank balance, then one would expect the bank balance to have risen by this amount.
When you say the opening balance was £82,000 out - is this just by comparing the reported balance to the statement?
If you work forward from the reported balance, with the income and expenditure added on - do you reach the closing bank balance.
I am wondering if there were uncleared amounts at the start of the year. Did you receive a large grant by cheque from a funder at the start of the year for example?
Bank reconciliation
You need to look at the bank reconciliation. It is quite normal for the cash book balance to differ from the bank statement, and the bank reconciliatiin is where the reasons for the differences are explained. Until you have seen the bank reconciliation you have no idea whether there is a problem or not.
John manages to be more concise
As usual, John manages to be more concise than my 'stream of consciousness' style of reply :)
How are the accounts maintained - in proper software, or on spreadsheets?
Have double entry principles been followed?
Is there a Trial Balance that sums to zero.
Have you looked for obvious things like transposition errors?
You should get further assistance
If the difference is not immediately presenting itself, then you really should try and get another pair of eyes to look. The amount you have talked about is large by any standards. Do you have any trustees you could involve who have a financial background. This is more than just a bit of miscasting of floats etc and needs a fully signed off check.
(I speak as a charity trustee for a charity that suffered a misappropriation before I joined)
Hope things get sorted to your satisfaction.
You need to check all the entries on the bank statement against the hand-written records. Is there another bank account, such as a deposit account (and if not, why not, with that amount of money swilling around)?
As an aside, I recommend you read the Charity Commission's guidance on Receipts and Payments Accounts That is what you are preparing, it's NOT an Income & Expenditure Account. That's something completely different. It's booklet CC16, I think. You can get it from their excellent website.
SOFA
If its a charity won't you be using a SOFA type format where the balances at the end represent the charitiable reserves?
I've only ever been involved in larger charities and tried to avoid all the Charity SORP that wasn't relevant to me so this may be incorrect!
The charity commission website is proabably the way forward though as its actually pretty useful.
Under £250,000 income
Under £250,000 income charities can opt for Receipts & Payments Account plus Statement of assets and some Notes. And a Trustees' Report, of course.