Glossary of terms

Accrual -This in accounting terms follows the ’matching concept, it is costs which have been incurred in the reported period, essentially that the invoice has either not been paid or received. It is a provision for an outstanding commitment.

Balance Sheet – A ‘snapshot’ of your charity, at any given time. It indicates what your charity is worth, & represents your assets & liabilities.

Budget - Agreed planned expenditure & income approved both operationally & strategically.

Cash Flow – A project schedule of future income & expenditure prepared month by month, which aids future funding needs & investment potential.

Creditors- These are suppliers who you owe for the period which you are reporting but whom you have not paid yet.

Current Assets- Are assets, which have a life of not more than one year.

Current Liabilities – Commitments, which fall due within one year

Debtors – This is income that you are due but has not been received.

Fixed Assets – Items of value that have a lifespan of more than one year, examples are land, computers, machinery and vehicles.

Liquidity- The readiness in which assets can be converted to cash.

Prepayments- Payments, which have been paid in advance of the service being received. Examples are insurance, council tax and water.

Reserves – Money set aside for unforeseen circumstances and which is freely available for charities general purposes, although should be supported by a reserves policy.

Restricted Funding -These funds can only be spent as per the terms & conditions of the grant, any variances or deviations must be with the strict approval of the funder.

Unrestricted funding-These funds have flexibility & can be spent how you see fit providing the expenditure falls within the object of your charity.

Variance - The difference between actual spend & budget

·        Adverse variance- means that your spend is greater than budget·        Favourable variance - signifies that your spend is less than budget 

Working Capital – Current assets less current liabilities, ideally the ratio should not fall below 1:1