Financial accounting
Produced in partnership with John Layton Associates and Stephen Sheen of Ichabod Industries Limited
Financial accounting

The following Local Government guidance note Produced in partnership with John Layton Associates and Stephen Sheen of Ichabod Industries Limited provides comprehensive and up to date legal information covering:

  • Financial accounting
  • The Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code)
  • The regulatory regime—accounting elements

Local authorities have complex financial arrangements, allocating resources and controlling spending across a wide range of services and managing diverse sources of funding. Each authority will have its own arrangements for recording the transactions that it undertakes and what has been spent and balances of resources. These records are called ‘management accounts’ where they are for the purpose of internal decision making. They can take any form that the authority determines will be efficient and effective. In contrast, financial accounting refers to the accounting processes required for external reporting of financial performance and position. For this purpose, there are detailed specifications for the accounts to be published and the way in which they should be prepared, based on statutory provisions and professional accounting standards.

This Practice Note summarises the requirements and highlights the key issues that relate to the financial accounts.

In England, Scotland and Wales, local authorities are primarily required to produce their financial accounts in accordance with statutory requirements. However, legislators focus on establishing an overall framework before passing responsibility for detail to the accountancy profession. Powers are retained to override professional standards in circumstances where legislators consider that particular transactions should have a different fiscal effect.

The totality of financial accounting provisions are termed proper accounting practices. The definition of proper accounting practices and the requirements for following them are