You work as a trainee accountant in an accountancy practice which specialises in accounting for charities. One of their clients is a charity which makes and donates teddy bears to sick children staying is hospitals or hospices

Preparation of receipts and Payments (CC16a) accounts

Question 1 

1.1.Scenario

You work as a trainee accountant in an accountancy practice which specialises in accounting for charities. One of their clients is a charity which makes and donates teddy bears to sick children staying is hospitals or hospices: Happy Memories, which is registered with the Charities Commission for England and Wales (CCEW).

You have been instructed by your manager to prepare, using the Charity Commission’s template: CC16a, the receipts and payments account, for the year ending 31^st December 2024 and a statement of assets and liabilities as at 31^st December 2024 

Happy Memories operates from a small estate of workshops that was donated from a generous benefactor many years ago. The premises cannot be sold and are only to be used for the purpose of the charity.

The charity receives income in various forms: donations from the public, legacies in wills, grants from funding bodies and receipts from fund raising activities.

To be able to make the teddy bears, the charity also receives toy fur, buttons, stuffing, thread, etc from local and national haberdashery stores free of charge, usually from end-of-line stock which cannot be sold in their stores. Although on occasions the charity does need to purchase some materials.

The charity also holds a small collection of bears once owned by local personalities and dignitaries which are displayed for visitors to view. These bears are considered to be priceless and irreplaceable due to the relation they have to a large toys’ manufacturer that once operated in the local area. The public who attend the exhibition generally leave a donation for the charity.

In addition to the information provided on the attached MS Excel spreadsheet, you should also enter the following transactions onto the CC16a receipts and payments return. 

During the previous year, the family of a child who received one of the bears donated cash to the charity to buy a new fabric cutting machine and replacement parts. Any surplus funds at the end of each year can be retained by the charity to spend on repairs and maintenance in future years.

During the current year, the charity also received two further grants:

1.to purchase new cutting tables for use in the workshop area – any underspend was required to be repaid in January 2025.

2.to assist with the payment of the salary of the part-time curator of the museum, any underspend could be kept for the following year to spend on the salary.

The charity employs four (4) members of staff to make the teddy bears. Additionally, several volunteers from the local community also help to make the bears from time to time.

On the 15^th March 2024, the charity transferred £2,000 into a fund to be used for the cleaning and repair of donated teddy bears. These funds would be held for the foreseeable future by the charity.

You have also been provided with the opening Statement of Assets and Liabilities as at 31^st December 2023.

No separate bank accounts are kept representing the various funds controlled by the charity. The information given below provides a breakdown of the opening funds. At 31^st December 2023

 You have also been provided with the following further relevant information as at 31^st December 2024.

On the attached spreadsheet you have been provided with a summary cash book for Happy Memories and are required to produce the year-end financial report.

1.2.Required tasks

a) You should prepare the following statements:

• Statement of receipts and payments for the year ending 31^st December 2024
• Statement of assets and liabilities as at 31^st December 2024

Using the CCEW CC16a template provided.

Provide appropriate workings and notes to clearly show the analysis of the closing balances on the cash funds within the financial statements.(70 marks) 

b)For the following transactions, you should prepare a written explanation to inform the Board of trustees:

               i.how entries have been made to the Receipts and Payments accounts in part a) above, and

              ii.how these transactions would be reported if the charity were required to use the SORP accruals-based reporting.

• The collection of bears held in the museum.
• The cutting tables purchased for use in the workshop.
• The donated materials to make the bears. (30 marks)

 Word count: 500 words (Total: 100 marks)

2. Additional guidance notes

2.1.You should ensure that you use MS Excel spreadsheet to completer the Receipts and Payments accounts.

2.2.You should ensure that you respond to the explanations required by the Board of Trustees concerning the disclosure of the events in the financial statements and how they differ (if at all) between the Receipts and Payments accounts and the SORP accounts.

2.3.You should submit your response to Moodle no later than the submission date unless you have a successful EC claim in place or hold a support statement from the University.

3.Marking Criteria

3.1.Marking Criteria

Indicative mark scheme – Coursework Part 2: question 1

4.Charitable Issues

Question 2

4.1.Scenario

A few issues have arisen from a recent board of trustees meeting, and you have been asked to prepare a briefing note on each.

Issues identified:

1) The board of trustees are considering opening a toy shop on site to raise further funds for the use of the charity.

2) To open the shop, a large injection of funds will be required to develop and convert a currently empty building on the estate.

3) The charity does not currently have the financial statements reviewed by an external accountant. 

4.2.Required tasks 

The briefing note should include, for each of the issues identified above:

a) A clear statement of the issue faced by the charity. (20 marks)

b) A critical discussion of why this issue is of significance for the charity drawing on relevant sources; Charity Commission (CCEW) guidance publications, Charity Acts 2011 & 2022, Charities SORP FRS 102(2019) and technical literature. (60 marks) 

c)Relevant and informed recommendations to resolve the issue.(20 marks)

Word limit: 1,500 words (Total: 100 marks)

5.Additional guidance notes

5.1. You should ensure that you use MS Word to complete your briefing notes.

5.2.You should submit your response to Moodle no later than the submission date unless you have a successful EC claim in place or hold a support statement from the University.

5.3.You should ensure that the references used are relevant to the issue being briefed and correctly referenced using the BCU-Harvard format.