How do I run a charity's money and accounts?
Charity accounting starts with the first transaction and ends with accounts the trustees approve and sign. The steps take treasurers and trustees through it in order: opening the books and setting controls, budgets and cash flow, choosing the accounts and the scrutiny they need, reserves and investment, then preparing, checking and signing the accounts, for England and Wales, Scotland and Northern Ireland.
30 steps, in the order you meet them.
Which accounts you must prepare, and who has to examine them, depends on your income, your legal form and which of the three jurisdictions you are in. Get the tier wrong and you either pay for an audit you never needed or file accounts that do not comply.
The thresholds move. Every figure in this part is held in one place and pulled into each page that cites it, so what you read is what the law says today rather than what it said when the page was written.
Look up
Glossary
- Grant
- Charities SORP
- Board of trustees
- Restricted funds
- Trustees’ annual report
- Gross income
- Designated funds
- Accounting reference date
- Connected person
- Independent Examiner’s Directions
- Free reserves
- Going concern
- Charitable company
- Conflict of interest
- Full cost recovery
Tools
- Free reserves calculator — Tool: planned
- Full cost recovery calculator — Tool: planned
- Which accounts do I need? — Tool: planned
- Which rules apply to my year end? — Tool: planned
Templates
- Accounts determination record — Template: planned
- Annual budget — Template: planned
- Authorisation schedule — Template: planned
- Cash book — Template: planned
- Cashflow forecast — Template: planned
- Chart of accounts — Template: planned
- Examiner engagement checklist — Template: planned
- Expenses policy — Template: planned
- Financial controls policy — Template: planned
- Free reserves calculation — Template: planned
- Full cost recovery calculator — Template: planned
- Going concern assessment — Template: planned
- Investment policy — Template: planned
- Lease register — Template: planned
- Receipts and payments pack — Template: planned
- Related party register — Template: planned
- Reserves policy — Template: planned
- Scrutiny determination record — Template: planned
- Scrutiny file checklist — Template: planned
- SORP tier determination — Template: planned
- SORP transition plan — Template: planned
- Trustee declaration — Template: planned
Understand
- Accounting thresholds — What are the charity accounting thresholds?
- The 2026 threshold changes — What changes on 30 September 2026?
- SORP 2026 and the tiers — What is the Charities SORP and which tier am I?
- Restricted and designated funds — What is the difference between restricted and unrestricted funds?
- File, but no scrutiny — Do we need an examination if we are under the threshold?
Do
- Step 1 · How do I start keeping accounts for a new charity?
- Step 2 · How do I set up my charity's chart of accounts?
- Step 3 · What should my charity's financial year end be?
- Step 4 · What financial controls does a small charity actually need?
- Step 5 · Who should be able to authorise payments, and up to how much?
- Step 6 · How should a charity handle trustee and volunteer expenses?
- Step 7 · How do we make sure we disclose every related party transaction?
- Step 8 · How do I account for a grant that must be spent on something specific?
- Step 9 · How do I build a budget for a charity?
- Step 10 · How do I forecast a charity's cashflow?
- Step 11 · How do I work out what a project really costs, including overheads?
- Step 12 · Do I need accruals accounts, or can I use receipts and payments? · legal risk: regulatory-sanction
- Step 13 · Does my charity need an audit, an independent examination, or neither? · legal risk: regulatory-sanction
- Step 14 · Which SORP tier is my charity in, and what does that change? · legal risk: regulatory-sanction
- Step 15 · Do our office and equipment leases now go on the balance sheet?
- Step 16 · How do I work out my charity's free reserves?
- Step 17 · What should our reserves policy say, and how much should we hold?
- Step 18 · Do we need an investment policy, and what should it cover?
- Step 19 · Can a charity borrow money, and what do the trustees have to do first? · legal risk: personal-liability
- Step 20 · What goes in a receipts and payments account?
- Step 21 · How do we move from cash accounting to accruals accounting?
- Step 22 · How do I put together a Statement of Financial Activities?
- Step 23 · What goes on a charity balance sheet?
- Step 24 · What notes do charity accounts have to include?
- Step 25 · What do trustees have to do about going concern? · legal risk: personal-liability
- Step 26 · How do we choose and appoint an independent examiner? · legal risk: regulatory-sanction
- Step 27 · How do we appoint a charity auditor? · legal risk: regulatory-sanction
- Step 28 · What will the examiner or auditor ask us for?
- Step 29 · Who signs charity accounts, and what are the trustees confirming? · legal risk: regulatory-sanction
- Step 30 · What do we actually have to do differently under the new SORP?
Common questions
The Charities SORP is the recommended practice that tells UK charities preparing accruals accounts how to apply the financial reporting standard. The 2026 edition sorts charities into three tiers by gross income, and it does not apply to receipts and payments accounts. See What is the Charities SORP and which tier am I?
A charity that is not a company, with gross income within its nation's ceiling, may prepare receipts and payments accounts; every other charity prepares accruals accounts. The ceilings differ between England and Wales, Scotland and Northern Ireland. Step 12, Determine which accounts to prepare, sets out both conditions.
For charities on accruals accounts, the new Charities SORP puts most leases on the balance sheet, changes income recognition and strengthens the reserves and going concern disclosures, whatever the charity's size. Tiering relaxes only five modules. Step 30, Transition to the 2026 SORP, starts with the first affected year.
A charity needs a statutory audit above the audit thresholds and an independent examination below them, except that England and Wales has a floor below which neither is required. Gross income decides, and assets can too. Step 13, Determine your external scrutiny requirement, works through the tests in order.
No UK charity regulator sets a required level of reserves. The trustees decide the level from the charity's own risks, and the reserves policy states that level, the reasons for it, what is held and the plan for any gap. Step 17, Write your reserves policy, sets out what to include.