Accounts can be simple or complex - it's usually best to keep them simple.Simple accounts are sometimes called ‘cash accounts’ or ‘receipts and payments accounts’. This system only recognises money received or paid out when it takes place. The basic rule is: if it happened, write it down.
More complex accounts are sometimes called 'accrual accounts' or 'income and expenditure accounts'. Refugee community organisations that are set up as companies, or which are charities with an income over £100,000, have to prepare their annual accounts on this basis (see Section 10).
However, their books and records which they keep themselves during the year can still be kept on the more simple ‘cash’ basis.
Accrual accounts reflect not only what happened in a period (usually one year), but what should have happened in the period. For example, if you receive an electric bill the day after the year-end, in accruals accounting it would be included because the electricity was actually used before the year-end.
So, unless you like making things complicated, stick to simple cash based accounting for your own system. This toolkit assumes this will be the choice you make.
This page is a summary of the information contained in the full online toolkit.
