Some advice needed on accounting practice please

KaelaH

I am trustee for a Charity Limited by Guarantee and am in the process of producing Accounts
I have a couple of questions regarding accounting practice on a couple of items please

1 - The charity have purchased an asset which has been capitalised ,however, in order to help the cash flow we recieved a grant to cover 75% of the cost from the local council.
When accounting for this do we take the grant as income in the year in which is was recieved or is it accounted for over the 4 years as the cost of depreciation is taken?

2 - Secondly, payment of utilities such as gas / electric / water are paid monthly in advance of the invoice which means that the supplier account at the end of the financial year shows as a debit. Am i correct in transferring these amounts to prepayments so that they show as a debtor? If not, where should they be?

Antoinnette

Well the way I understand it, according to the Charity SORP guidelines, grants received for the purchase of fixed assets should be recognised as income in full as and when they are receivable, and should not be amortised over the life of the asset. However the treatment also depends on what sort of grant it is. If the nature of the grant places a restriction on the use of the asset then you should set up a restricted fund and reduce this over the life of the asset.

Defo put down utilities as prepayments.

stevef

That is the correct treatment for capital grants in local authority land, but the grant should not be recorded in the 'cost of Service' lines but included in the'Taxation and non-specific grant line'. The added complcation in LA's is that under statue the grant can not stay in the general fund, so through the Movement In Reserves Statement you have to debit the General Fund and credit Capital Adjusment Account.

If their are unsatisfied conditions on the grant, on receipt the grant gets credited to 'Capital Grants Received' in the Balance Sheet until the conditions are met. When the conditions are met, transfer into the Comprehensive I and E statement (in taxation line), for transfer back into the Capital Adjusment Account in the Balance Sheet through the MIRS.

But that is Local Government for you, why make things easy?

Antoinnette

I learn something new everyday....of course I missed LOCAL AUTHORITY in the original post so ignore my answer completely. Stevef knows much much more than i do:001_smile: