Adjustments Module Overview
The Adjustments Module is the place to go if you would like to add Accruals and Deferrals and to add any fund or category transfers.
Most smaller churches and charities (who have less than £250,000 turnover) file accounts on a Receipts and Payments basis, which means that Accruals and Deferrals are not needed, except for any uncleared cheques.
Watch this short video to learn more about the Adjustments Module:
Further guidance on Adjustments and 'terminology' is given below...
Note: Only items with 'material value' (see the section called 'How Precise do the charity's accounts need to be?' in the link) need to be adjusted
Therefore, do you need to adjust for an £8 purchase that 'lands in the wrong financial year on your bank account'? Of course not. What about if it was an £800 purchase? Possibly.
So at what point does something have 'material value' and need to be adjusted? This will be different for different size charities, for example, you may set your organisation transaction threshold at £500. If you are unsure, you should ask your independent examiner.
Accruals & Deferrals
Accruals and Deferrals allow you to properly account for income and expenditure that relates to a particular financial year, but 'lands in the wrong financial year on your bank account' e.g. Gift Aid that relates to your current financial year, but isn't received into your bank account until the following financial year.
ExpensePlus offers the following options:
Used where income from a financial year hits the bank account in the following financial year (e.g. Gift Aid that is still yet to be claimed from HMRC).
Used where expenditure from a financial year hits the bank account in the following financial year (e.g. PAYE and Pension contributions typically get paid in the month after the one they relate to).
Used where expenditure gets paid in advance (e.g. a deposit for a weekend away venue paid in the financial year prior to when the event is taking place)
Used where income is received in advance (e.g. ticket income received in the financial year prior to when the event is taking place).
Typically, organisations only add accruals and deferrals at year-end and reverse these out at the start of the next financial year; however, you can add accruals and deferrals during the financial year if you wish to, for example on a monthly basis.
Transfers between Categories
ExpensePlus allows you to split income and expenditure transactions to the correct categories when recording transactions, so this option is usually only used where you wish to 'bulk cross-charge'. For example, some churches designate 10% of their income to go to a missions fund, or if you receive a grant for a particular project you are running, you might wish to cross-charge £100 per month to cover some of your administration costs.
Transfers between categories show up in your income and expenditure reports and where these are between different funds, they also affect your fund balances as you would expect. Transfers between categories can only be done between income and income categories and expenditure and expenditure categories. This is done to avoid a common issue that occurs in other accounting software (where expenditure to income category transfers are allowed, but as a result, both the income and expenditure of the organisation get artificially inflated leading to issues at year-end). Where you are cross-charging income, you would do this by showing a +ve income in the category you wished to allocate the designated amount to, and a -ve income in the category it was coming from. Similarly for expenditure, a +ve expenditure would show in the category paying the money to cover administration costs, and a -ve expenditure would show in the category the money is going to offset the costs of.
These are commonly used if your organisation wishes to set aside or designate money e.g. you may wish to have a 'reserves fund' and set aside £20k from your general fund into a separate fund, to allow the money that has been set aside for reserves to not get included in your general fund balance, or you may wish to start a new fund e.g. for a building project and create a fund to fund transfer to move into this fund money from another fund.
Fund-to-fund transfers don't show up on your income and expenditure reports but do affect your fund balances, as you would expect.