How to show that you have received a grant in your accounts in Sage Accounting.
Description
This could be for a grant received from the government or an organisation used to fund your business.
Here we explain two ways to account for a grant:
- Record that you've applied for the grant before you receive the funds.
This shows that you expect to receive the funds so your balance sheet reflects this in advance. Then record the receipt of the money once it arrives. - Record the receipt of the money once it arrives.
Resolution
Option 1: Record that you've applied for the grant before you receive the money
You may want to record that you've applied for the grant before they receive the funds.
This shows you expect to receive the funds, so your balance sheet reflects this in advance.
To record the grant:
- Create two new ledger accounts. These will help you trace and report on the expected funds and the amount of the grant when you receive it. These amounts appear as separate items on your management reports.
- Accrued Grant Income - use this to record the expected funds. This is reported as an Asset on your balance sheet. Once you receive the money, the balance of this ledger account is reduced to zero
- Grant Income - use this to record the amount of the grant. This is reported as Income on your profit and loss
- Enter a journal to record that you've applied for the grant. This adds the funds to your balance sheet and your profit and loss.
- Enter a bank receipt to record that you've received the money. This adds the funds to your bank account and reduces the accrued grant income to zero.
For this article, we'll use the following example:
- Your company applies for a grant of £10,000 on 10th April
- You enter a journal to show that you've requested the funds on your balance sheet
- You receive the money on 20th April
- You enter a bank receipt to show that you've received the money
- From Settings, then Business Settings, select Financial Settings, then Chart of Accounts.
Select New Ledger Account and complete the following information:
| Included in Chart | Leave this selected. This will make sure you include the balance of this account on your reports. |
| Ledger Name * | Enter a name of your choice, such as Accrued Grant Income. |
| Display Name * | This is the name that appears on the reports. Enter a name that makes sense to you, such as Accrued Grant Income. |
| Nominal Code * | For example 1150. You can use any number here but it's good practice to keep the numbers in each category consistent. This is so use a number that's close to your other Asset accounts. For the default chart of accounts use a number between 1000 and 1190. |
| Category * | Current Asset. This is to make sure that the balance of the account appears on your Balance Sheet in the Assets section. |
| Category Group | This defaults to Asset and you can’t change this. |
| VAT Rate | Choose No VAT. |
| Visibility | Leave the defaults selected. |
- From Settings, then Business Settings, select Financial Settings, then Chart of Accounts.
Select New Ledger Account and complete the following information:
| Included in Chart | Leave this selected. This will make sure you include the balance of this account on your reports. |
| Ledger Name * | Enter a name of your choice, such as Grant Income. If you have received lots of grants, you might want to create a ledger account for each one. |
| Display Name * | This is the name that appears on the reports. Enter a name that makes sense to you, such as the name of the grant, if more than one. |
| Nominal Code * | For example 4950. You can use any number here but it's good practice to keep the numbers in each category consistent. This is so use a number that's close to your other Asset accounts. For the default chart of accounts use a number between 4000 and 5000. |
| Category * | Other Income. Choose this to make sure the balance of the account appears in the Income section on your Profit and Loss. |
| Category Group | This defaults to Income and you can’t change this. |
| VAT Rate | Choose No VAT. |
| Visibility | Leave the defaults selected. |
- Go to Adjustments, then Journals.
- Select New Journal and enter the date and a reference. In our example, this would be 10th April.
- Enter the details of the ledger accounts and debits and credits, for example:
| Ledger Account | Details | Debit | Credit |
|---|
| 1150 - Accrued Grant Income | Grant requested | 10000.00 |
|
| 4950 - Grant Income | Grant requested |
| 10000.00 |
- Select Save.
When you've received the money, create an Other Receipt transaction.
If you're using bank feeds, or importing bank transactions from a file, you need to make sure you choose the correct ledger account. For example 1150 Accrued Grant Income.
To manually enter the receipt:
- Go to Banking, select New, then New Sale or Receipt.
- Select Other Receipt and enter the date, reference and total amount of money received.
- Choose the ledger account for Accrued Grant Income. For example:
| Ledger Account | Details | VAT rate | Total |
|---|
| 1150 - Accrued Grant Income | Grant received | No VAT | 10000.00 |
- Select Save.
You’ve now recorded receipt of the grant. Using our example, your ledger accounts update as follows:
| Ledger Account | Debit | Credit |
|---|
| 10 April | 1150 - Accrued Grant Income | 10000 |
|
| 4950 - Grant Income Received |
| 10000 |
| 20 April | 1200- Bank account | 10000 |
|
| 1150 - Accrued Grant Income |
| 10000 |
Option 2: Just record receipt of the money
To record the grant in this way there are two steps:
- Create a new ledger account for the grant money received. Use this to record the amount of the grant. This reports as Income on your profit and loss.
This will help you trace and report on the money received from the grant. It will appear as a separate item on your management reports. - Record that you've received the grant.
For this article we'll use the following example:
- Your company receives a grant of £10,000 on 20 April 2020
- You received the grant into the main bank account for your company
- You enter a bank receipt to show you've received the money
- From Settings, then Business Settings, select Financial Settings, then Chart of Accounts.
Select New Ledger Account and complete the following information:
| Included in Chart | Leave this selected. This will make sure you include the balance of this account on your reports. |
| Ledger Name * | Enter a name of your choice, such as Grant Income. If you receive grants from different sources, you may want to record this in separate ledger accounts. |
| Display Name * | This is the name that appears on the reports. Enter a name that makes sense to you, such as Grant Income. |
| Nominal Code * | For example 4950. You can use any number here but it's good practice to keep the numbers in each category consistent. This is so use a number that's close to your other Income accounts. For the default chart of accounts use a number between 4000 and 5000. |
| Category * | Other Income. Choose this to make sure the balance of the account appears in the Income section on your Profit and Loss. |
| Category Group | This defaults to Income and you can’t change this. |
| VAT Rate | Choose No VAT. |
| Visibility | Leave the defaults selected. |
Record that you received the money as an Other Receipt.
If you're using bank feeds, or importing bank transactions from a file, you need to make sure you choose the correct ledger account. For example 4950 Grant Income.
To manually enter the receipt:
- Go to Banking, select New, then New Sale or Receipt.
Select Other Receipt and enter the date, reference and total amount received.
Choose the new ledger account you've created. For example:
| Ledger Account | Details | VAT rate | Total |
|---|
| 4950 - Grant Imcome | Grant received | No VAT | 10000.00 |
- Select Save.
You’ve now recorded receipt of the loan. This updates your ledger accounts with the following values:
| Ledger Account | Debit | Credit |
|---|
| 1200 - Bank account | 10000 |
|
| 4950 -Grant Income |
| 10000 |
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