How to show project grant funding as not a profit

How to show project grant funding as not a profit

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Hi everyone,

this is possibly (hopefully!) a very basic question.

I have a new micro-business (myself and a couple of other self employed workers) delivering arts project work in local communities. At the end of our first accounting period, the company (which is Ltd by Guarantee) will be holding several thousand pounds in grant funding which has been received to deliver projects over the next eighteen months. How do I declare this on the balance sheet so it does not appear as a profit?

Is it as simple as declaring the future spending commitments as liabilities, so the company balance shows as zero even though the bank balance is not, or are there further things I must consider?

Many thanks for any advice!

Hector.

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By TerryD
21st Feb 2014 16:41

yes - that simple!

I take it you are not a charity, just a not-for-profit organisation. Revenue should be brought into account as you earn it - i.e. spend it on delivery of the project. so you need to enter the unspent spent grant income as deferred income (within creditors), reducing the income shown in the Income & Expenditure Account. This does, though, presuppose that you must spend the grant or it would become repayable. If that isn't the case, then you have a profit.

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Replying to lionofludesch:
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By hectormolecular
18th Mar 2014 16:10

thanks!

Hi TerryD, thanks for that clear answer and sorry for a late response.

 

I am not a charity, just a not-for-profit, and yes all my grant income is repayable if not spent - it is tied to very specific project delivery. To be able to enter it as deferred on the Income and Expenditure is exactly the sort of thing I wondered about.

 

Cheers!

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