This article, the third in our series on charity accounts, will focus on the objectives of charities’ Statement of Financial Activities (SoFA), outlining what information is included, and what information should be disclosed under FRS 102 SORP
Historically, accounting by charities has been based on a business-type profit and loss presentation, where a surplus or a deficit in the income and expenditure account did not necessarily or fairly reflect the true position of the charity. The traditional income and expenditure account did not always fully explain all of the charity's activities.
Charities often receive significant amounts of restricted income which can affect the types and level of service they provide and it is important to consider changes in the amounts of all the resources of the charity. The SoFA is a single-accounting statement with the objective of:
- showing all income and expenditure of the charity in the year on all its funds;
- demonstrating how the charity has used its resources in furtherance of its objects for the provision of benefit to its beneficiaries;
- indicating whether there has been a net income or expenditure including capital gains and losses; and
- providing a reconciliation of all movements in the charity's funds.
It is not intended to demonstrate a charity's efficiency.
