Charity accounts include four things: a statement of the money received and spent during the year, a statement of what the charity held at the year end, notes that explain how the figures were put together, and a trustees’ annual report telling the story behind the numbers. Every element has a job to do, and an incomplete set is the most common reason accounts bounce back from an examiner.
This guide covers charities registered in England and Wales. Charities in Scotland and Northern Ireland follow different rules set by their own regulators. What follows is what each part contains and how the requirements shift with the charity’s size and legal form.
Who needs to read this
Trustees and treasurers of registered charities, and committee members of community groups moving towards registration. Trustees carry the legal responsibility for the accounts even when someone else prepares them, so knowing what a complete set looks like is part of the role, not an optional extra.
Receipts and payments or accruals: the two preparation bases
Smaller unincorporated charities can often prepare accounts on a receipts and payments basis: a simple record of cash in and cash out, plus a statement of assets and liabilities. Larger charities, and all charitable companies, prepare accruals accounts under the Charities SORP, which match income and spending to the period they relate to rather than the date money moved. Which basis applies to your charity depends on income levels and legal structure, and the current thresholds are published on GOV.UK rather than repeated here, because they change. The SORP itself was revised for accounting periods starting on or after 1 January 2026, and its requirements now scale in tiers set by gross income, so a smaller charity discloses less than one in the top tier, which is also the only tier that has to produce a cash flow statement. The tier levels are on GOV.UK. If you are near a boundary, take advice before choosing.
The trustees’ annual report
The accounts travel with a trustees’ annual report. At minimum it explains what the charity exists to do, what it actually did during the year, and how the activities delivered public benefit. It is not marketing copy: funders, regulators and examiners read it alongside the figures, and a report that contradicts the numbers invites questions. Write it after the accounts are drafted, so the two tell the same story.
Showing the money fund by fund
Charity accounts must distinguish restricted funds, given for a specific purpose, from unrestricted funds the trustees can apply freely. That means the accounts show income, spending and closing balances for each category, not one merged total. If your bookkeeping does not track funds separately through the year, this analysis becomes a painful reconstruction at year end. We explain the distinction fully in restricted and unrestricted charity funds, and the day-to-day records that make it manageable in our charity bookkeeping records checklist.
What the notes to charity accounts must include
The notes state the accounting basis used, break down significant income sources such as grants and donations, and disclose matters readers need to judge the accounts, including transactions with trustees and any related parties. Charities claiming tax reliefs should also keep the records behind those claims, as set out in the GOV.UK guidance on charities and tax.
Weaknesses that examiners see repeatedly
- Restricted income merged into general funds with no analysis
- A trustees’ report written from memory that conflicts with the figures
- Assets listed with no evidence of ownership or valuation
- Missing comparatives for the previous year
- No minutes recording trustee approval of the accounts
Papers to assemble before preparation starts
Bank statements for every account for the full year, records of income by source and fund, invoices and receipts for spending, grant agreements and any funder conditions, and details of assets held. Depending on size, the finished accounts may then need independent scrutiny, which we compare in independent examination versus audit.
Where preparation help fits
Many small charities prepare their own accounts successfully. Help earns its keep when the charity moves to accruals accounting, holds multiple restricted funds, employs staff, or faces its first external scrutiny. Our charity bookkeeping support starts from the records, which is where most problems that surface at review stage actually begin.
Frequently asked questions
Do small charities have to follow the same rules as large ones?
No. The reporting framework scales with income and structure. Smaller unincorporated charities have simpler options; charitable companies always face company law requirements on top of charity rules. The current bandings are on GOV.UK.
Who has to approve charity accounts before they are filed?
The trustees, collectively. Approval should be minuted at a trustee meeting, and the accounts signed on the trustees’ behalf. An examiner or accountant cannot approve accounts for you.
What is the difference between the accounts and the annual return?
The accounts are the financial statements themselves. The annual return is a separate regulatory filing summarising key information, to which accounts are attached for charities above certain income levels. They are related but distinct obligations.
Can charity accounts be prepared from a spreadsheet?
Yes, if the spreadsheet is complete, reconciled to the bank and analysed by fund. The format matters less than whether someone independent could trace every figure back to a record.
How we can help
Our charity accounting support covers accounts preparation, fund accounting and the records that stand up to external scrutiny, for charities across the Midlands. Request a quote and we will tell you exactly what your charity’s accounts need to include.