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Cashwords (jargon buster)

Some of the terms below are not strictly accountancy terms, but we have included them because they help to explain the importance of good financial management.

Some of the terms are difficult to put into layman’s language, but we have included them because it will be useful for groups to have some knowledge of what the accountant or auditor is talking about.

Note that this is a first draft. A fuller version will be available soon, that will include some of the more basic terms relevant to small charities.


A means of arriving at an income and expenditure statement by adjusting the receipts and payments to take account of amounts that should have been paid or received before the end of the accounting period.

Accountant’s report

A report confirming accounts have been properly prepared, given by a qualified accountant.

Accounting regulations

The Charities Act (Accounts and Reports) are frequently abbreviated to accounting regulations. They refer to the statutory requirements of the Act for the content and form of charity accounts.


Items possessed by an organisation – including money goods or property. The term also refers to any legal rights the charity may have to receive goods, services, money or property.


An examination of the accounts undertaken by a registered auditor. The Charities Act states that all charities above the �250,000 threshold must have an audit. Increasingly, charities below this threshold are being required to have an audit by funders – especially local authorities. Auditors are regulated by the accounting body to which they belong.

Bank reconciliation

A procedure used to check the accuracy of your bookkeeping – and also to spot errors made by your bank. See CASHFACTS: Bank reconciliation.

Balance sheet

Summary of assets or liabilities of a charity at a given time – also describes the funds that are represented by the net assets. A balance sheet can be see as a snapshot of the charity’s finances.


A restricted fund (or funds), capital must be retained by the trustees for the benefit of the charity and not spent.

Charities Act

The 1993 Act of Parliament that regulates accounting standards within charities. See the Charity Commission’s website.

Computerised accounts

Various computer software packages that can be used alongside or instead of the traditional paper-based bank analysis book. Well known packages include Excel, Quickbooks and Sage.

Designated funds

Unrestricted funds which the trustees have set aside for a particular purpose.

Direct charitable funds

Expenditure relating directly to the objectives of the charity ie. the income and expenditure concerned with the charity’s activities, distinct from management and administration costs and fundraising/publicity costs.


A type of restricted fund that must be kept intact and not spent. An expendable endowment can eventually – at the trustee’s discretion – be converted into spendable income.

Financial controls

A set of procedures that govern how a charity handles its finances. See CASHFACTS: Financial controls.

Financial statements

The organisation’s accounts including notes to the accounts and any other statements that need to be included.

Fixed assets

Assets that have a value of more than one year ie. a new computer would normally be considered to have a life of three years. Charities are required to keep a fixed-assets register.

Fundraising and publicity costs

Costs resulting directly from fundraising activities ie. staff time, advertising, mailing costs.

General funds

Funds that may be used generally for the advancement of the charity’s objectives – they are not restricted funds, nor funds that have been earmarked for a particular purpose.

Governing document

This document sets out the objects and rules of the organisation and needs to be approved by the Charity Commission when a charity is registered or if amendments are made to the governing document. It can also be called: the constitution, trust deed, governing instrument or memorandum and articles of association (for a charitable company). In Scotland it can be known as an explanatory document or as a founding deed.

Gross income

All income of the organisation during a financial year before deductions are made. Under the Charities Act it is defined to create thresholds to exclude all capital (endowment) income, sale of fixed assets and sale of investments.

Income and expenditure account

A summary of the income and expenditure for a financial year, showing only the revenue transactions.

Incoming resources

All resources available to the organisation, including restricted income, capital (endowment) income, gifts in kind and intangible income.

Independent examination

The Charities Act allows for charities below the �250,000 threshold to have an independent examination rather than a full audit. Though less stringent than an audit, the examination is still intended to check that the charity’s finances are being managed properly. The person who carries out the examination is called an independent examiner. They can either be an accountant or someone who is recognised to be financially competent.


Amounts owed by the organisation at the time the balance sheet is drawn-up. The cost has been incurred, but the bills remain to be paid.

Management and administration

Costs directly resulting from the management of the charity’s assets, compliance with statutory requirements and organisational administration.


A clause with the charity’s governing document that outlines the purpose for the charities existence. Charities cannot do work outside their objects. Note that CASHWORDS uses the term objectives instead of objects as this is a more readily understandable term.


Otherwise known as central or core costs, overheads are the basic costs of running the organisation – typically office costs, salaries of core staff, rent etc. The line between overheads and project costs can be difficult to draw. However, when fundraising you should note whether funders allow overheads to be included in project costs ie. the running of a project will include 25% of a core member of staff’s time.


Charities are now almost universally funded through projects, pieces of work that have specific outputs agreed with the funder(s) ie. a lunch will be provided for 30 pensioners, fives day per week, for 50 weeks of the year. Core costs can be included in project budgets. Note that even when funders support an organisation’s core costs, they will only do so if project targets are met. See CASHFACTS: Fundraising and Writing Budgets.

Permanent endowment

A type of endowment fund where the trustees have no discretion to convert the endowment into spendable income. It must be kept intact as capital.

Receipts and payments account

A summary of the cash transactions of the charity. This simple form of accounts is often used by small charities.


These are sums of money an organisation accrues through a surplus which are kept aside. There are three types of reserves:

  • Restricted: money where the donor has specified on what it must be spent.
  • Designated: money the trustees have set aside for a particular purpose.
  • General: uncommitted funds.

It is now recognised as good practice for charities to have reserves – generally three month’s running costs. However, if a charity’s level of reserves goes much beyond this it can impact on fundraising. See CASHFACTS: Fundraising.

Restricted fund

Income that must be spent on a specific purpose as defined, for instance, in a funders letter or – in the case of an endowment – within the charity’s objects.

SORP The statement of recommended practice (SORP) for charities gives guidance on how items within charity accounts must be treated. See the Charity Commission website.

Statement of financial activities (SOFA)

The SOFA summaries all incoming resources and use of resources. It replaces the previous standard – the income and expenditure account – as the primary financial statement: going further by bringing together all the transactions of the charity.

Total expenditure

The out-goings of the organisation for the financial year, excluding purchases of fixed assets and investments.

Unrestricted funds

Funds held for the general purpose of the charity – but they have to be spent within the stated objectives.

Last updated: Wed, Apr 27 2005 - 12:02:44 PM

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