| Aspect | Receipts & Payments Accounts | SORP FRS 102 Accounts |
|---|---|---|
| Eligibility | Charities with income of £250,000 or less and unincorporated or CIO | Charities with income over £250,000 or incorporated and ALL Charitable Companies |
| Basis of Accounting | Cash basis (records cash actually received and paid out) | Accrual basis (records income and expenses as they are earned/incurred) |
| Complexity | Simple format, suitable for smaller charities | Detailed format with multiple disclosures |
| Financial Statements | Receipts & Payments account and a Statement of Assets & Liabilities | Statement of Financial Activities, Balance Sheet, Cash Flow Statement |
| Disclosure Requirements | Minimal disclosure, focuses on cash balances | Extensive disclosure, including notes on accounting policies and specific activities |
| Governing Regulation | Not governed by SORP, follows Charity Commission guidelines | Complies with the SORP (FRS 102) standard |
| Primary Purpose | Provides a cash-based overview of the charity’s financial activity | Gives a complete view of the charity’s financial position and performance |
Understanding Receipts & Payments Accounts vs. SORP FRS 102 Accounts
Trustees have many responsibilities and duties. One of these is making sure that the right reporting is used for their size and type of charity. There are 3 types of charity:
- Unincorporated trust
- Charitable Incorporated Organisation (CIO)
- Charitable Company (Limited by Guarantee Company with Charitable status)
Not all of these have to prepare the same type of accounts! The reporting format depends on a charity's size, income, balance sheet, and whether or not it is incorporated. For charities that meet specific criteria, Receipts & Payments accounts may be suitable, while larger or incorporated charities must adhere to more comprehensive reporting under SORP FRS 102.
In this post, we’ll explore what Receipts & Payments accounts are, who can use them, and compare them with the more complex SORP FRS 102 accounts, which are mandatory for certain charities.
What are Receipts & Payments Accounts?
Receipts & Payments accounts are a simpler method of financial reporting available to small charities in the UK. They focus solely on cash inflows and outflows over a financial period without considering income earned but not yet received or expenses incurred but not yet paid (called accruals). This method provides a straightforward snapshot of a charity’s cash position and is often used by smaller charities due to its simplicity.
Can your charity use Receipts & Payments Accounts?
Receipts & Payments accounts can be used by charities that meet the following criteria:
- You are an unincorporated trust or a Charitable Incorporated Organisation (CIO)
- Your income is £250,000 or less per year
For charities that meet these criteria, Receipts & Payments accounts can simplify annual reporting and provide trustees and stakeholders with a clear picture of cash movements, alongside the Trustees Annual Return (see our blog: Trustees’ Annual Report - What to Include and How to Make It Your Shop Window)
What are SORP FRS 102 Accounts?
SORP FRS 102 accounts (Statement of Recommended Practice under the Financial Reporting Standard 102) are a more detailed and regulated form of reporting required.
SORP accounts are based on accrual accounting, which means they account for income and expenses as they are earned or incurred, regardless of when cash is actually received or paid. This approach gives a more accurate representation of the charity’s financial health, including assets and liabilities. If your income is over £500,000 you must also prepare a cashflow statement as part of your accounts.
Who Must Use SORP FRS 102 Accounts?
SORP FRS 102 accounts are mandatory for charities that meet any of the following criteria:
- Your income is over £250,000 per year, regardless of the type of charity
- You are a Charitable Company (registered with Companies House and The Charity Commission) regardless of your income
- Your charity has complex financial activities: For charities engaged in more complex financial activities, SORP FRS 102 accounts offer the necessary structure and disclosures.
Key Differences Between Receipts & Payments Accounts and SORP FRS 102 Accounts
To summarise, here’s a comparison of the key features and requirements of Receipts & Payments accounts versus SORP FRS 102 accounts:
Conclusion
Choosing the correct financial reporting framework is essential for maintaining compliance, transparency, and accountability within a charity. For smaller, unincorporated charities and CIO’s, Receipts & Payments accounts offer a straightforward, cash-based view of finances. However, for larger or incorporated charities, SORP FRS 102 accounts are mandatory, providing a more comprehensive picture of the charity’s financial health.
It is ultimately the responsibility of the trustees to ensure that the charity is preparing the correct type of accounts, arranging for an independent examination or audit where required, and submitting these accounts to the relevant authorities on time.
Trustees must understand these differences to meet reporting obligations accurately, maintain regulatory compliance, and uphold the charity’s reputation for transparency and accountability.
TRUSTEES SHOULD NOT JUST SIGN WHAT THE ACCOUNTANT GIVES THEM AND ASSUME THEY ARE CORRECT – we see many accounts signed off by Trustees that are not compliant with the reporting requirements necessary for their charity e.g. Receipts and Payments submitted when they are over £250,000, or a hybrid between the 2 reporting standards, and it’s not clear which reporting has been followed!
For more information on charity accounting requirements, visit the Charity Commission’s Receipts & Payments Guide and SORP FRS 102 Guidelines.