Treasurers > Reporting and Accounting > What type of accounts?

What type of accounts do I need to keep?

There are two types of accounting, and which one should be used depends on the income of the PCC.  The simplest form of accounting is called "Receipts and Payments", and to be eligible to prepare accounts on this basis, the gross income of the PCC must not exceed £100,000.  Parishes over this threshold will need to prepare accounts using "Accruals Accounting".

To calculate your gross income, you should add up all of the parish's financial entities, including any separate funds or accounts for groups which fall under the PCC's jurisdiction.

Definition of gross income and expenditure

Statutory gross income  : Gross income is the total recorded income of the PCC in all unrestricted and restricted funds before the deduction of any costs or expenses.  Any transfers from capital funds representing the conversion of expendable endowment into income must be included. Gross income should be recorded before the deduction of any costs or expenses and includes the following : 

• Voluntary receipts
• Gross proceeds of activities for generating funds
• Investment receipts
• Receipts from charitable activities
• Any expendable endowment spent or transferred to income funds and any unapplied total return allocated or transferred to income funds during the year (this latter is unlikely to arise in the context of small or unendowed charities).

The following items should be excluded:

• a loan received by the PCC; 
• the repayment to the PCC of a loan made by them; 
• the proceeds of the sale of investments or 'functional fixed assets' (such as a hall or curate's house, which are held for the purpose of furthering the mission of the church) or any gain or profit on their sale; 
• donations received by the PCC with the specific requirement that they be held as endowments (i.e. the income can be used by the PCC and would be shown above, but the primary endowment would not be included).

Statutory total expenditure : Total expenditure is the total gross expenditure by the PCC from all funds, including the expenditure of the income received on endowment funds. 

• Costs of generating funds
• Costs of charitable (PCC) activities
• Governance costs.

The following should be excluded 

• the granting of a loan;
• the repayment of a loan by the PCC;
• the purchase of investments and 'functional fixed assets' (such as a hall or curate's house, which are held for the purpose of furthering the mission of the church) or any loss on their sale; 
• any transfers between income funds or from income to endowment funds.

In calculating the gross income and total expenditure, there should be no netting off (no cancelling income against expenditure). Suppose the parish runs a fete and raises £1,000 after charging £500 for expenses. They should show £1,500 of income and £500 of expenditure. If the netting off is small (not material), say the expenses were only £50, then this requirement to 'gross' up can be ignored.

NOTE for Teams, united benefices and pluralities :

The general principle to keep in mind is that statutory accounts must be produced for the legal entity. That means that PCCs (as the legal entity) must prepare appropriate annual accounts for the ecclesiastical parish.

In the case of united benefices and pluralities, and teams which comprise a number of separate parishes, each parish must produce accounts in the statutory format.  A summary financial statement  can be produced at the level of the team, but there is no requirement to do so and there are no constraints on the format.

Other teams may have been formed on the basis of a single parish and with more than one place of worship, or by combining under pastoral re-organisation two or more former parishes.  As before, accounts that meet the statutory requirements must be produced at the parish. Of course there is nothing to stop the production of supplementary financial statements that relate to the different congregations or DCC's but there is no requirement to do so and there are no constraints on the format. It may be appropriate for such information to be included as a note to the accounts.

Full guidance for "receipts and payments" accounting is provided in the full "The Charities Act and the PCC - SORP 2005 Receipts and Payments edition"

Larger Parishes

Parishes with gross incomes larger than £100,000 must produce accounts on the "accruals" basis. Smaller parishes may choose this option, particularly where the treasurer has a broader knowledge of accounting practice.

Full guidance for accruals accounting is provided in the full "The Charities Act and the PCC - SORP 2005 edition"