How do we move from cash accounting to accruals accounting?

England and Wales: This page sets out the position in full. Scotland: the same process, with no difference in principle. The trigger simply comes at a lower income level. Northern Ireland: the same process, with no difference in principle. The trigger is lower here too.

Is converting to accruals the same as adopting the new SORP?

No. Moving from receipts and payments onto accruals accounting for the first time is a different transition from adopting a new SORP edition. Treating them as one is the most serious mistake a treasurer can make here.

The conversion itself works the same way in England and Wales, Scotland and Northern Ireland. It does not matter whether the charity reports to the Charity Commission, OSCR or the Charity Commission for Northern Ireland. This page is for a charity that must, or has chosen to, prepare accruals accounts. If that is still open, first determine which accounts to prepare.

A first move onto accruals accounting, which is what this page covers, brings in a set of first-time adoption reliefs. A charity already on accruals that adopts the new SORP edition is doing something different. It has a different, narrower set of simplifications, covered in transition to the 2026 SORP.

The two can be confused, and this page does not try to settle every point where they meet. Where the difference matters to your own figures, get advice. Do not assume either set of reliefs applies in full to your case.

Your accruals conversion might fall in the same year your reporting period first has to apply the new lease accounting rules. If so, the lease rules reach you through the first-time adoption rules, not through the transition that charities already on accruals use. The section on restating comparatives sets out what that means.

What goes on the opening balance sheet?

The opening balance sheet brings in everything the cash-basis books never had to record. Accruals accounting means recording what the charity is owed and what it owes, its fixed assets and its leases, not only the cash that moved. The transition date is the date at which a charity moving onto accruals accounting draws up its opening balance sheet. At that date, identify:

• amounts owed to the charity (debtors)
• amounts it owes (creditors)
• fixed assets the charity already owned but never capitalised
• every lease it is party to

The opening balance sheet this produces is the starting point an examiner can test against real evidence: invoices, agreements, bank confirmations. It is not a set of guesses carried forward from the cash book. What the year-end balance sheet itself must show is covered in build your balance sheet.

Fixed assets go on at a supportable value, not a guessed one. If the charity truly cannot establish an asset’s cost or worth, that gap belongs in the record of how the opening position was reached. It should not be smoothed over silently.

Do comparatives have to be restated?

The SORP requires comparative information to be restated on a like-for-like basis as far as practicable. This applies both on first adopting the SORP and on first applying any SORP requirement that does not come from the accounting standard itself.

“As far as practicable” is doing real work in that sentence. It is a limit the SORP itself sets, not a goal to beat. Inconvenience alone is not a reason to skip restatement.

Leases follow their own first-time rules. The SORP points a charity preparing accruals accounts for the first time to the first-time adoption arrangements in FRS 102. Under them, the SORP requires a lessee to identify its leases as at the transition date. It uses the facts at that date, not the date each lease began.

The lease liability is the present value of the payments still to come. The right-of-use asset equals that liability, adjusted for anything prepaid or accrued. A leased investment property is measured at fair value instead.

A charity already on accruals that first applies the new lease rules uses a different transition, with its own treatment of comparatives. Do not borrow that treatment for a first move onto accruals. Keep the lease working separate in your own working papers, and get advice where the two sets of rules seem to meet.

Build your lease register sets out the full method. It covers which arrangements count as a lease and which can stay off the balance sheet. One route out of recognising a lease at all is a term of 12 months or less. That term is tested against the substance of the arrangement, not the paperwork alone.

Can a charity move back to receipts and payments?

It is an open question. No source found in this research settled whether and how a charity may revert. Nor did any settle what happens to its comparatives if it does.

The accruals threshold rose in England and Wales at the same time as the SORP changed. That creates a mismatch nobody has fully worked through yet. Some charities were required onto accruals accounting under the old, lower threshold. On the same income, they are now entitled to move back to receipts and payments accounts.

If this applies to your charity, treat it as an open question. Get advice before you assume either that going back is simple or that it is not allowed.

Scotland and Northern Ireland: the same process, a lower trigger

Nothing about the mechanics of conversion changes north of the border or in Northern Ireland. The opening balance sheet, the debtor and creditor exercise, and the lease treatment all work the same way.

What differs is only when a charity has to go through it. Both nations set their accruals trigger at a lower income level than England and Wales. A charity that would still qualify for receipts and payments in England and Wales may already be required onto accruals in Scotland or Northern Ireland. Each nation’s figure is in the charity accounting thresholds.

With the opening balance sheet agreed, the next step is to build your Statement of Financial Activities for the first accruals year.

Common mistake: not restating comparatives

The prior year was prepared on a different basis, so restating it can feel false. It seems like made-up figures for accounts that have already gone out.

But the SORP requires comparative information to be restated as far as practicable on a like-for-like basis. This applies both on first adopting the SORP and on first applying any SORP requirement that does not come from the accounting standard. Leases have their own first-time rules, set out in the section on restating comparatives.

Worked example

A charity crossing the accruals threshold for the first time has to identify everything owed to it and by it, as at the transition date. It must bring any fixed assets it never recorded onto the balance sheet at a supportable value. It must also identify every lease it is party to. That includes arrangements nobody in the organisation has ever thought of as a “lease” at all.

The result is an opening position an examiner can agree back to real evidence, not one taken on trust from the cash book.

This step’s own worked example is kept generic here. On their known facts, none of this site’s three fixed example organisations is crossing the threshold for the first time. Wrenfield and Tollgate sit well below it. Saltmarsh, as a charitable company, has been on accruals accounting from the start, whatever its income.