The Charities Act 2011 specifies that charities must keep their accounting records for at least six years from the end of the financial year in which they are made. If the charity ceases to exist within the six-year period, then the last trustees of the charity should continue to preserve the charity accounts. Records can be disposed of if the Commission consents in writing.
The accounting records kept by the charity must be able to show and explain transactions by doing the following:
Examples of records that charities should be keeping are explained below:
A cash book is a record of a charity’s transactions (income and expenditure) which explains what each of the transactions is related to. Cash books should be updated daily or weekly to keep track of every transaction that occurs. If your charity has multiple bank accounts, then a separate cash book should be created for each account.
Charity accounting software can make keeping track of daily income and expenditure easier than ever. AccountsIQ ensures software is easily accessible, making it a simple task to keep track of financial transactions and performance.
Keeping track of bank statements is important for both the charity to understand their transactions and to produce an accurate annual report. Bank statements should be regularly input into a charity’s cash book to ensure all transactions have been recorded. This reconciliation will ensure that there’s no missing or unexplained income or expenditure.
Bank statements are important evidence of transactions and are used to produce the annual report.
In order for a charity to produce reliable reports, it needs to be able to provide supporting evidence at any time it’s asked to disclose its financial position. This means that any income or expenditure needs to have the corresponding supporting evidence. Vouchers, invoices, receipts and bank statements are all forms of evidence depicting transactions.
Keeping accurate and reliable accounting records is essential for any charity. It enables you to stay on top of finances whilst being prepared to disclose information at any time. As a result, your charity will be seen as reliable and able to efficiently produce financial reports without struggling to find relevant information.