The company does not need to make an accrual for distributing the profit it has make.

At the end of the year, the charity will show a surplus for the year which it will add to its reserves. The charity will then show as a distribution of its reserves payments it makes to the local community.

Therefore there is no need to make a accrual, the payment to the local community will be recorded in the accounts as and when the payment is made.

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Thanks, Mark

I didn't realise the entity was not a registered chartity and Corporation Tax would be paid on the surplus.

In essence, the accrual would be like a bonus / dividend which also distributes the profits for the year.

As long as at the balance sheet date there is a valid obligation to pay the surpluses to the local community, an accrual is justified.

The obligation has to exist at the balance sheet date so there should be minutes of meetings which authorise the payment of the surpluses. It is acceptable to have an obligation that doesn't specify an amount, but the key part is this obligation must be in place by the year end. You can't agree now to distribute the surplus as there would not have been an obligation in place at the balance sheet date.

In summary, providing there is something in writing in place as at the year end, it is okay to include an accrual. Obviously I can not advise to back-date minutes, but I have heard of firms doing this to put through bonuses / dividends.