All UK charities are required by law to publish annual accounts. This study is concerned with the choice faced by smaller charities whether to use the accruals (charities SORP) or receipts and payments (R&P) basis. A study of financial reporting by 90 smaller Scottish charities, supplemented by interviews, examined drivers behind the choice of approach. Both accruals and R&P accounts were considered legitimate means of reporting and the choice was found to be driven largely by perceived preferences of users of accounts rather than costs. KEYWORDSCharity accounting; cash accounting, accruals accounting, Scotland, charity regulation. IMPACT STATEMENTThis study shows that whilst R&P accounting has only been available to Scottish charities in the £100,000 to £250,000 income band since 2011, it is already being used by almost 4 in 10 charities in that band. Charities consider that both the accruals and R&P bases are legitimate means of reporting to stakeholders and the perceived requirements of the stakeholder influence the accounting choice to a greater extent than cost-constraints. The implication for policy makers is that both approaches have their merits in a framework of charity regulation with neither being considered more legitimate than the other.
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