Your business has a clear social or environmental mission that is set out in its governing documents;
You are an independent business and earn more than half of your income through trading (or are working towards this);
You are controlled or owned in the interests of your social mission;
You reinvest or give away at least half your profits or surpluses towards your social purpose;
You are transparent about how you operate and the impact that you have.
Charities & Companies follow different legislation and hence have different formats and note requirements.
When a Charity is also a Limited Company it is required to do a combination of the formattings in its statutory accounts.
Deferred income is used often in Charity Accounting in order to ensure that only the element of the income received that relates to the actual months within the Financial year are accounted for in the Financial Statements.
The money is deferred (removed from the profit & loss) and put into the balance sheet as a current liability (debt) which will be released back into the profit & loss within the next 12 months.
The video explains the situations when this happens.
In Charity Accounts there are 4 types of fund that can appear on a set of Financial Statements:
Restricted, where the funder has specified the money be spent on specific expenses or activity;
Endowment, where the money is to be spent on a long term asset such as a building, and the Endowment is released into the P&L account at the same rate as the depreciation on the asset;
Designated, Funds that were originally unrestricted but the Board have voted for it to be shown on the Financial Statements as designated, put aside, for a project they wish to fund in the future. This can be undone by the Board at any time and the money fall back into the Unrestricted pot.
Unrestricted, anything that can be used against any type of the businesses expenditure.