Accounting & Reporting

Accounting serves the purpose to record, monitor, classify, report and interpret the financial data of the scheme. To avoid suspicion, mistrust and interruptions to your operations it is important that the scheme's financial transactions are accurately recorded and reported. Accounting standards and rules depend on the regulatory framework of your country of location - so here is a short summary of the basics.

What are the minimum accounting records that need to be kept?

What are the accounting steps to be followed:

a)    Collect receipts from all transactions

Get a receipt whenever you pay for something, order something, take delivery or enter into liabilities. Receipts issued should be pre-numbered with an incremental serial number. Receipts should be given whenever you sell something, grant liabilities or receive payments.

b)    Record all transactions chronologically in (cash)books or a general ledger

The Cash Book (General Ledger) for receipts and payments is the master accounting record. Every receipt is entered either in your software ledger or your paper books or ledger stating date of receipt, amount of money, purpose and account number where the amount has to be booked. Cash and other entry books should be updated weekly.

Sample cash book entries

Source: Bnet

c)    Store the corresponding receipts in a systematic way

·    Record of all orders received and orders planned

·    Record of sales revenue (cash receipts against delivery and invoices)

·    Receivables or debts (debtors ledger) showing the date they fall due for collection and payment

·    Payments made to suppliers (payments against receipt of goods or services and invoices)

·    Payables or liabilities (creditors ledger) showing the date they fall due for collection and payment

·    Record of bad debts and outstanding creditors

·    Record of goods returned to suppliers

·    Stock control sheets showing: stock levels for each item, stock location, movements and age, consignment or "on-approval" stocks, stock-taking or inventory counting records and reconciliation's of physical stock to the accounting records

See a list of all institutional files & records to be kept.

d)    Every month or quarter and at year end close and balance general ledger

Every month or quarter and at a year-end the accounts should be "closed" and balanced. This means actually preventing further entries for the same period after the chosen cut-off time and date.

At that point in time receipts and other assets should equal creditors and other liabilities.

Depending on the level of activity of your scheme you will need to balance the ledger either every month or every quarter. Furthermore, the inventory should be counted and its current value assessed. The physical amount should be compared to the accounting records at the time the count is performed. Any missing stock needs to be investigated, the reason recorded and/or adjusted off in the books.

b)    Prepare financial statements (balance sheet, income statement, cash flow statement)

This will often be done by an external accountant. The more accurate and complete your general ledger the less costly the accountant services should be. It would be favourable if you can find an accountant to join your organisation’s support or management team. The costs for accounting and reporting could be much reduced.

In the first year of existence the institution will be based on the income and expense projections (budget), cash-flow projections and balance sheet forecast elaborated in the business plan. In the years following the set-up of the support institution or association, a balance sheet, income statement and cash-budget will have to be elaborated at the end of each year for reporting purposes.

The management should always compare the actual results with the planned figures. Differences and variations should be analysed and explained in a written sheet attached to the comparison table. Shortcomings, threats and improvement areas should be derived from the analysis.

Note 11 The accounting and reporting system should comprise:

The attached sample financial statements are for demonstration purposes only! Please be aware that you will need to comply with the national legal framework and standards valid in your country of location.

Sample balance sheet,

Sample income statement

Sample cash-flow statement

Source: BNet

A Practical Accounting Handbook for Start-Up Businesses

Source: DevelopingManagement.com