Preparing the annual financial statement for an association: what should it include?
What is an annual financial statement?
An annual financial statement typically comprises two main parts:
- The income and expenditure account (also known as the profit and loss account). An overview of all income and expenditure for the financial year
- The balance sheet: a snapshot as at 31 December of all assets and liabilities/equity
For small organisations, the income and expenditure account is the most relevant. The balance sheet becomes more important as the organisation has more assets (building, equipment, long-term loans).
Difference from the budget
The annual accounts are retrospective: what has actually come in and gone out? The budget is forward-looking: what did you expect? Present both side by side, then members and the board can immediately see where the plan matched and where not.
What is in the income and expenditure account?
All income:
- Rental income per space or category
- Membership contributions
- Subsidies (per funding body)
- Event income
- Sponsorship income
- Other income
All expenditure:
- Fixed costs (rent, energy, insurance)
- Staff and volunteer costs
- Activity costs
- Maintenance and fittings
- Board and administration
- Depreciation of fixed assets
The balance (income minus expenditure) is the result: positive (surplus) or negative (deficit).
Treasury Audit Committee
In associations, the treasury audit committee checks the annual accounts before the AGM. They verify whether the figures are correct and whether the records are in order; no accountant is required, but independence is essential. More about the treasury audit committee.
Presentation at the AGM
Present the annual accounts at the General Meeting with a short verbal explanation. Mention the main deviations relative to the budget and explain them. Ask the meeting to approve the annual accounts; that is a formal act that is recorded in the minutes. Also read how to organise a good AGM.
Record-keeping obligation
Keep the annual accounts and all underlying records for at least seven years. This applies to receipts, bank statements, invoices and contracts.