| 4.27. | This SORP requires that larger charities above the charity audit threshold (see Appendix 3, 'Thresholds for the UK and the Republic of Ireland') and those smaller charities opting to report on an activity basis must classify their income and expenditure by activity. |
| 4.28. | Income must be analysed according to the activity that produced the resources. Expenditure must be analysed by the nature of the activities undertaken. |
| 4.29. | Where relevant to the understanding of material activities, the expenditure analysis headings should enable the user of the accounts to understand the relationship with income derived from the activity. For example: |
| a charity selling donated goods through a shop could use the description 'Shops' within row A3 ('Income from other trading activities') and row B1 ('Expenditure on raising funds'); |
| a charity running a care home could use the description 'Residential care fees' within row A2 ('Income from charitable activities') and 'Residential care costs' in row B2 ('Expenditure on charitable activities'); |
| an arts charity providing a mix of paid-for and free services could use the description 'Admission fees for galleries and exhibitions' within row A2 ('Income from charitable activities') and use the heading 'Operation of art gallery and touring exhibitions to schools and community' in row B2 ('Expenditure on charitable activities'); and |
| an endowed grant-making charity mainly making grants to advance education could use the description 'Investment income' within row A4 ('Investment income') and 'Grants to education and research institutions, student bursaries and other grants' in row B2 ('Expenditure on charitable activities'). |
| 4.30. | In most cases, it will be clear which activity generated the income or expenditure. Expenditure shared between two or more activities should be apportioned between them on a reasonable, justifiable and consistent basis (see the SORP module 'Allocating costs by activity in the statement of financial activities'). |
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