Cover Image
close this bookBasic Accounting for Credit and Savings Schemes (Oxfam, 1996, 96 p.)
View the documentAcknowledgements
View the documentIntroduction
Open this folder and view contentsChapter 1: Getting started
Open this folder and view contentsChapter 2: Recording the transactions
Open this folder and view contentsChapter 3: Balancing the books
View the documentChapter 4: Sorting the data
Open this folder and view contentsChapter 5: The balance sheet
Open this folder and view contentsChapter 6: Administration of loans
Open this folder and view contentsChapter 7: Administration of savings
Open this folder and view contentsChapter 8: Sustainability
Open this folder and view contentsChapter 9: Stock
Open this folder and view contentsChapter 10: Checking the accounts
View the documentGlossary
View the documentFurther reading
View the documentAppendix 1: A worked example
View the documentAppendix 2 :Blank forms
View the documentOther books on financial management and income generation from Oxfam Publication
View the documentOxfam Publications

Chapter 4: Sorting the data

Accounts are not an end in themselves. They are designed to provide information to those who have an interest in the project: the donors, savers, and borrowers.

The columns of figures in the cash and bank books provide a day by day historical record of the financial activities of the project, rather than a summary of its financial position. The cash books provide the data from which the financial position can be calculated. The bookkeeper needs to sort and summarise that data in order to provide useful information for the managers of the project. Management information is the term used by accountants to describe financial summaries prepared for managers.

Initially the transactions are sorted into payments and receipts. In order to provide more information, the items can be further sorted into categories. These categories should match the categories in the budget.

In a credit and savings scheme the main categories of income are likely to be:

· grants received from donors
· loan interest
· loan repayments
· savings deposited.

In order to sort the income into these categories the bookkeeper needs to include a column in the cash book for each category. There should also be an 'other' column to record items which do not fall into any of the budgeted categories. Accountants call this type of cash book an analysed cash book because it sorts or analyses the transactions into the selected categories Figure 14 gives an example

Credit scheme cash book

Receipts

Date

Description repaid

Voucher Interest

Amount

Grants

Loans

Loan

Savings

Other

2 Jan

Withdrawn

R1

130,000





130 000

from bank









10 Jan

Saver 3

R2

50,000





50,000


deposit








Total



180,000




50,000

130,000

Figure 14: Analysed cash book: receipts

In an analysed cash book each transaction is entered twice: once in the amount column and again in the appropriate category column.

For example, in figure 14, the withdrawal of 130,000 from the bank on 2 January appears in the 'amount' column and in the column for the category 'other'; the deposit from Saver 3 on 10 January appears in the 'amount' column and in the column for the category 'savings'.

At the end of the month the column totals will show the total income received in each category during the month. In order to ensure that the analysed cash book 'balances', the bookkeeper should check that the analysis column totals add up to the total of the 'amount' column. For example, in figure 14, the total of the 'sayings' column (50,000) plus the total of the 'other' column (130,000) add up to the total of the 'amount' column (180,000).

The budgeted categories of payments for a credit and saving scheme are likely to be:

· loans issued
· administration expenses
· savings paid back to participants.

Therefore, the bookkeeper could set up the payments side of the cash book to look like figure 15:

Credit scheme cash book

Payments

Date

Description Issued

Voucher repaid

Amount expenses

Loans

Savings

Administration

Other









3 Jan

Purchase stationery

1

1,000



1,000


4 Jan

Refreshments

2

500



500


15 Jan

Loan to group A

3

30,000

30,000




25 Jan

Loan to group B

4

50,000

50,000




28 Jan

Loan to group C

5

40,000

40,000




31 Jan

Closing balance


58,500




58,500

Total



180.000

120.000


1.500

58.500

Figure 15: Analysed cash book: payments

The receipts and payments report

Using the column totals from the analysed cash book, the bookkeeper can summarise the cash transactions of the project for the month of January as follows:

Credit scheme cash book
Receipts and payments summary
January 19XX

Opening balance

NIL

Receipts


Cash from bank

130,000

Savings deposited

50.000


180,000

Payments


Administration

(1,500)

Loans issued

(120.000)



Closing balance

58.500

Figure 16: Receipts and payments summary from cash book

The bookkeeper should sort the receipts and payments in the bank book in the same way as for the cash book. This is shown in figures 17 and 18.

Credit scheme bank book

Receipts

Date

Description repaid

Voucher Interest

Amount

Grants

Loans

Loan

Savings

Other

1 Jan

Grant from donor

BR1

200,000

200,000





2 Jan

Saver 1 deposit

BR2

25,000





25,000

2 Jan

Saver 2 deposit

BR3

45,000





45,000

31 Jan

Saver 4 deposit

BR4

13,000





13,000

Total



283.000

200.000




83.000

Figure 17: Analysed bank book: receipts

Credit scheme bank book
Payments

Date

Description

Cheque

Voucher issued

Amount repaid

Loans expenss

Savings

Admin

Other

2 Jan

Cash withdrawn

000051

1

130,000




130,000

5 Jan

Loan to group D

000052

2

50,000

50,000




15 Jan

Vehicle hire

000053

3

1,300



1,300


16 Jan

Office rent

000054

4

5,000



5,000


28 Jan

Loan to group E

000055

5

45,000

45,000




31 Jan

Closing balance



51, 700




51, 700

Total




283,000

95.000

6,300


181,700

Figured 18: Analysed bank book: payments

Using the analysed bank book, the bookkeeper can summarise the bank transactions for the month of January:

Credit scheme bank book

Receipts and payments summary January 19XX

Opening balance

NIL

Receipts


Grant from donor

200,000

Savings deposited

83.000


283,000

Payments


To cash

(130,000)

Administration

(6,300)

Loans issued

(95,000)

Closing balance

51.700

Figure 19: Receipts and payments summary from bank book

The bookkeeper can then combine these two summaries to provide a complete report of the project's transactions for the month. Accountants call this a receipts and payments report.

Receipts and Payments Report: January 19XX

Opening balance

NIL

Receipts


Grant from donor

200,000

Savings deposited (50,000 + 83,000)

133.000


333,000

Payments


Administration (1,500 + 6,300)

(7,800)

Loans issued (120,000 + 95,000)

(215.000)

Closing balance (58,500 + 51,700)

(110.200)

NOTE: The withdrawal of cash (130,000 shown as a receipt in the cash book and as a payment in the bank book) does not appear on this combined statement because it is not a transaction with the outside world: it is simply a transfer of the project's money from the bank into the cash safe.

Figure 20: Example of a receipts and payments report

The example above in figure 20 is the receipts and payments report for the month of January. A receipts and payments report can be prepared for any length of time. Accountants call the length of time covered by a report the accounting period.

The budget and actual report

The bookkeeper can combine the receipts and payments report with the budget to produce a budget and actual report:

Budget and Actual Report: January 19XX


Budget

Actual

Varlance

Income




Grant from donor

200,000

200,000

0

Savings deposited

150,000

133,000

17,000

Expenditure




Administration

10,000

7,800

2,200

Loans issued

340.000

215.000

125.000

Figure 21: Example of a budget and actual report

The variance column shows the difference between the budgeted amounts of income and expenditure and the actual amounts.

The committee should review the budget and actual report each month in order to monitor the financial progress of the scheme. For example, in figure 21 the variance column shows that savings deposited, administration expenses, and loans issued were all less than budgeted.

A summary of this chapter

1 In order to provide management information the bookkeeper needs to sort and summarise the individual transactions (the data) of the project.

2 The bookkeeper can sort the transactions as they happen by entering them in the columns of an analysed cash book. There should be a column heading for each budgeted category of income and expenditure.

3 Using the information from the analysed cash books, the bookkeeper can prepare monthly summary reports known as the receipts and payments report and the budget and actual report.

4 The management committee should review the monthly summary reports in order to monitor the financial progress of the scheme.