5. Accounting records

The 2005 Act requires charities to keep proper accounting records. The 2006 Regulations specify that the accounting records must be sufficiently detailed to show and explain the transactions of the charity. In particular they must be able to:

• show, day by day, the money received and spent by the charity
• record the assets and liabilities of the charity
• disclose the financial position of the charity at any time
• produce a statement of account in line with the Regulations.

The 2005 Act also specifies that charities must keep accounting records for at least six years from the end of the financial year in which they are made. However, charity trustees should be aware that the length of time they need to keep records may also be governed by other legislation or by agreements with funding bodies.

The records kept by charities will vary depending on circumstances and may be manual or computerised. Examples of records that a charity should keep are:

• a cash book recording day to day income and expenditure
• bank statements which are reconciled regularly (for example, monthly) with cash book records
• vouchers, invoices, receipts and other supporting evidence of income and expenditure.

Examples of other records that a charity may keep are:

• a general  ledger with supporting purchase and sales ledgers, recording day to day income and expenditure but also any sales or purchases that have not yet been paid
• computer spreadsheets
• commercial accounting software with supporting data.