Charity Accounting: Why It Is So Different from Business Accounting

Published:4 March 2025

Charity finance isn’t quite like business finance—it’s more complex, more regulated, and often far more frustrating for those managing it.

That’s why our CEO, Paul Foden, has launched The Accidental Expert, a YouTube series designed to demystify charity accounting and SORP compliance. In the first episode, Paul breaks down what makes charity accounting different from standard financial reporting—and, spoiler alert, it’s not just about donations and good intentions.

What Makes Charity Accounting So Unique?

In this episode, Paul explores:

Funds: Why every pound must be assigned to a specific fund—restricted or unrestricted.
Activities: How charities categorise spending across projects, fundraising, and support costs.
Chart of Accounts: Why traditional accounting structures don’t work for charities.
Support Costs Allocation: The tricky process of dividing admin, governance, and finance costs across different activities.
Income Recognition Rules: Why charity income doesn’t follow standard accounting matching principles.
The Trustees’ Report: How this key document provides transparency but often turns into a marketing exercise.
Financial Statements: How the Statement of Financial Activities (SoFA) replaces the usual profit & loss report—and why the balance sheet doesn’t match up with funds.

Charity finance teams juggle more reporting layers, stricter compliance rules, and an overwhelming amount of paperwork compared to traditional businesses. And while the Charity SORP is there to help standardise financial reporting, it’s not exactly an easy read.

Want a Simpler Way to Manage Charity Finances?

Paul covers all this (and more) in the first episode of The Accidental Expert—watch it now to get the full breakdown.

💡 📺 Watch the full episode on YouTube: The Accidental Expert.
💡 📖 Read more about SORP compliance on our dedicated page.
💡 🔎 Looking for accounting software built for charities? Check out Aedon.Charities.