Charity accounts: what trustees of smaller charities need to know
Trustees carry the legal responsibility for a charity's accounts whether or not they have a finance background. The rules for smaller charities are more manageable than they look, provided the right basis and the right level of scrutiny are chosen.
Two ways to prepare the accounts
Unincorporated charities with gross income under £250,000 can prepare receipts and payments accounts: a summary of money in and out, plus a statement of assets and liabilities. It is simple and often entirely appropriate. Above £250,000, and for all charitable companies and CIOs that choose it, accruals accounts under the Charities SORP are required, with a Statement of Financial Activities, a balance sheet and notes. The SORP basis is more work but gives funders and trustees a far clearer picture.
Independent examination or audit?
- Gross income up to £25,000: no external scrutiny required by law, though the governing document may require it
- Gross income over £25,000: an independent examination is required
- Gross income over £1 million, or over £250,000 with gross assets over £3.26 million: a full audit by a registered auditor
An independent examination is a lighter review than an audit: the examiner checks that the accounts follow the records and the rules and reports anything of concern, without the full testing an audit involves. For charities with income over £250,000, the examiner must hold a recognised qualification; the Institute of Certified Bookkeepers is one of the listed bodies.
What goes to the Charity Commission
Every registered charity completes an annual return within ten months of its year-end. Charities with income over £10,000 also file their accounts and a trustees' annual report, which explains what the charity did, how it is run and how it is funded. Charitable companies file at Companies House as well. Late filing is public: the register shows the charity as overdue, which funders notice.
Fund accounting: the part that trips people up
Money given for a specific purpose is a restricted fund and must be tracked separately from general funds, from the day it arrives to the day it is spent. A grant for a youth project cannot quietly cover the electricity bill. Good bookkeeping tags every transaction to a fund as it is recorded, so the year-end split is a report rather than a reconstruction, and trustees can see at any meeting what is committed and what is free.
Everything else trustees are on the hook for
Gift Aid claims, kept accurate and claimed promptly. Payroll and pension duties, exactly as for any employer. A reserves policy that says how many months' costs the charity holds and why. And management reporting through the year, because a charity that only learns its position at year-end cannot steer.
This note is general guidance for charities in England and Wales; Scotland and Northern Ireland have their own regulators and thresholds. We keep the books and prepare management reports for charities and community organisations; talk to us about yours.
Published 7 October 2026.