Changing accounting basis

This support article covers everything you need to know about changing accounting basis, from what you need to consider before changing, to how you go about making the change within ExpensePlus.

What changes when my accounting basis changes?

When you change your accounting basis, it impacts your accounts in several ways:

1. It changes how transactions are handled. With accruals, transactions are accrued based on the date to which the transaction relates. In receipts and payments, the date of a transaction is based on the date it appears on your bank statement. So a change in accounting basis can affect the month in which income and expenditure appear in your financial reports.
2. It changes the features that are available in ExpensePlus. If you're changing from accruals to receipts and payments, you will no longer be able accrue or defer income and expenditure. Incoming loans will be shown as income, and loan repayments as expenditure. Fixed Assets are no longer capitalised, but instead shown as expenditure.
3. You'll need to restate your opening balances for that financial year, to match your new accounting basis. Similarly, in your accounts you'll also need to restate your prior year figures to match your new accounting basis. This second part can be more complicated, because you'll need to consider:

• transactions in the prior year that need to be accrued/deferred into your current financial year, and also
• transactions from the previous year (i.e. the year prior to the prior year) that need to be accrued/deferred into the prior year.

If you are just getting started with ExpensePlus, please see this separate Help Guide article about Choosing your accounting basis when setting up ExpensePlus.

Changing from receipts and payments to accruals

​This section outlines what to do if you wish to switch to accruals accounting.

Option 1: Set up a new instance of ExpensePlus on an accruals basis (FREE)

This option will enable you to:

1. Keep your prior financial years on a receipts and payments basis without making any changes.
2. Correctly handle future transactions on an accruals basis.
3. Restate your prior year closing balances on an accruals basis (as required).
4. Restate your prior year income and expenditure figures on an accruals basis (as required).

To set up a new instance of ExpensePlus on an accruals basis, send a message to support@expenseplus.co.uk. We'll transfer over as much of your existing setup as possible, such as funds, categories, donors, customers, suppliers, payees, users, memorised bank transactions, etc.

Option 2: Update your accounting basis in ExpensePlus

Typically, this option is best if you are already partway through your financial year. Note, however, that with this option, you will need to switch to an accruals accounting basis within ExpensePlus (within the Organisation Settings screen), then add in any loans, fixed assets, accruals and deferrals into your opening balances and prior year accounts.

When updating your accounting basis to accruals, we would highly recommend that you enable auto-accruals.

Changing from accruals to receipts and payments

​This section outlines what to do if you wish to switch to receipts and payments accounting.

Option 1: Set up a new instance of ExpensePlus on a receipts and payments basis (FREE)

This option will enable you to:

1. Keep your prior financial years on an accruals basis without making any changes.
2. Correctly handle future transactions on a receipts and payments basis.
3. Restate your prior year closing balances on a receipts and payments basis (as required).
4. Restate your prior year income and expenditure figures on a receipts and payments basis (as required). 

To set up a new instance of ExpensePlus on a receipts and payments basis, send a message to support@expenseplus.co.uk. We'll transfer over as much of your existing setup as possible, such as funds, categories, donors, customers, suppliers, payees, users, memorised bank transactions, etc.

Option 2: Continue on an accruals accounting basis

If you are likely to switch back to an accruals accounting basis in future (for example, because your income is likely to go above the new maximum threshold of £500,000 for receipts and payments accounting), you might wish to consider not switching to a receipts and payments basis, but staying on accruals.

Frequently Asked Questions (FAQs)

Can't I just switch to receipts and payments, but leave ExpensePlus on accruals?

​​When changing your accounting basis to receipts and payments, you need to:

• Restate your opening balances for that financial year on a receipts and payments basis (with no fixed assets, loans, accruals, deferrals, etc).
• Restate your prior year income and expenditure on a receipts and payments basis.
• Ensure all the income and expenditure for both the current and prior financial year are on a receipts and payments basis.

This is not only complicated to do, but also involves altering your prior year accounts (leaving you without a proper record of the transactions that form part of your signed off accounts).

Here is what is involved in switching your existing accounts from accruals to receipts and payments:

• ​Remove any investment gains/losses that have been entered.
• ​Remove any fixed asset depreciation that has been added.
• ​Ensure that all purchases have been coded to 'expenditure' categories (not 'fixed asset' categories).
• ​Rematch any loans received as 'income received' (not as 'loan received').
• ​Rematch any loan repayments as 'direct debits' (not as 'loan repayments').
• Rematch any opening balance reversals as income or expenditure.
• Delete any non-cash balance sheet items from your fund opening balances.
• Remove any manual accruals or deferrals that have been entered within the creditors & debtors screen.
• Disable auto-accruals (if enabled).

What if I need help with changing accounting basis?

If you need help changing your accounting basis, then we can support you with this. However, this isn't included in the regular software support that we offer.

Click here to find out more about getting additional help and support.