1. Accounting Terminology Explained Allison Taylor and Paul Cropper
Guide to how we organise our budgets at Huddersfield

2. Objectives
Understand the differences between key words (accrual, deferral and prepayment, debtors and creditors, cash and profit, asset and liability, financial and management accounts, etc…)
Identify how accounting processes and procedures work at the University of Huddersfield
Understand the meaning of common financial statements

3. Part 1 - Accounting Theory
Accounting terms
Management v financial accounts
Accounting data entry
Profit & Loss
Balance sheet
Debits and credits
Costing
Cash
Measuring performance

4. Accounting terms Transactions Chart of accounts Trial Balance
Profit & Loss
accounts
Costing
analysis
Cash flow
statements
Balance sheets

5. Financial v management accounts
Financial Accounts: Prepared at the end of each year and are a ‘snap shot’ of an organisation’s financial standing. Published externally. Management Accounts: Prepared each month and compare forecast income and expenditure with actuals. Published internally.

6. Accounting data entry Where do transactions go? Journals Ledgers
Agresso

7. Profit and loss account
An analysis of income and expenditure which includes:
Turnover (All income)
Staff expenditure (salary payments)
Non-pay costs (any expenditure other than pay e.g. printing, stationery, telephone bills etc..)
Gross profit
Net profit

8. Balance sheet
“A summary of all the accounts of a business. Usually prepared at the end of each financial year. The term 'balance sheet' implies that the combined balances of assets exactly equals the liabilities (i.e. net worth)”.

9. Debits and credits
Newton’s third law of physics “to every action there is an equal and opposite re-action”
Accountancy principles “to every debit there is an equal and opposite credit(s)!”
(eg. if you are paying money into your bank account you would debit the bank when making a journal entry and credit an income account).

10. Costing Identifying the expenditure of an activity
Different types of costing: ABC, marginal costs, absorption costing, etc..
University wide methodology: Transparency Review and full Economic Costing

11. Cash
Cash flow statement: A report which shows the flow of money in and out of the business over a period of time. Cash accounting: This term describes an accounting method whereby only invoices and bills which have been paid are accounted for. However, for most types of business in the UK, as soon as you issue an invoice (paid or not), it is treated as revenue and must be accounted for.

12. Measuring financial performance
Variances from budget
Profit or loss
Sufficient cash
Ratio analysis
Published Annual Financial Accounts (
Monthly Management Accounts
(Available from Agresso or Accounting Technicians)

13. Historical cost surplus has slipped from MS No 1 last year to 4th, marginally behind Institute of Cancer Research and Edge Hill (a recurring name!). Plus London Met which delivered 59.5% - this was after a reported deficit of £5.5m on ordinary operations but a property surplus on disposal of £67.8m (consolidate all its courses on one site.

14. Our staff cost to income is almost exactly on the sector average at 52
Our staff cost to income is almost exactly on the sector average at 52.63% (v 52.45% MS average)
Position was achieved largely as a result of income growth. So care for the future here as growth is potentially constrained

16. 7 MS including ourselves with no debt, or 11 with debt under 1%.
University of the Highlands and Islands
University of Wales Trinity Saint David
The Institute of Cancer Research
London Business School
The University of Huddersfield
The City University
The University of Glasgow

17. Part 2 - How do things work at Huddersfield?
Budgeting
Structure of the accounts
Transactions
Reporting
Where to go for help
Financial Services department
I am going to run through some of the terms you might hear used at Huddersfield

18. Budgeting
The annual budget planning function utilizes a University-wide Devolved Revenue model to allocate funds to schools, services and strategic provision.
Practice here:
The ‘Income’ that schools can spend comes out of the resource allocation model DevRev.

19. Budgeting
The DevRev model is simple, straightforward and transparent. All qualifying income is top-sliced to give the strategic provision [SP] and the remainder is split between schools and infrastructure.
Basically all the income streams are identified and out of this total ‘pot’ of money a proportion goes to schools, services and strategic provision to fund university wide initiatives (For % is set aside for Reserves , 10.96% goes to strategic provision (this includes a further 5% for reserves) and the remainder is split between schools and services – 27.6% to services and the balance to schools)

20. Budgeting
The budget operating function is contained within the finance system, Agresso, which allows budget holders and financial services staff to update, maintain, and monitor the operating budget throughout the financial year.
Budgets are contained within Agresso and reflect the amounts that the university will earn and spend during the year. These amounts are monitored regularly by budget holders and finance staff.
We operate a devolved budgeting system whereby budget holders are responsible for allocating and managing their own budgets – Agresso allows this and also gives us the ability to pull together the budget as a whole for reporting at a high level to see the bigger picture.

21. Budgeting Forecasting of income and expenditure
Profiling (placing ‘pots’ of income and expenditure into the correct month)
Virements (Moving budgets around)
Forecasting or Planning/Estimating – For a given period
Also can relate to student numbers or staff numbers for a given period
At the University we budget for the current year and also plan for the following year in Feb/Mar.
Also do 5 year forecasts so that we can plan for the future and so that senior staff can make strategic decisions.
Profiling – Helps with variance analysis so that we can identify variances through out the year rather than having a surprise at the end of the year

22. Structure Coding Structure:
The account identifies the type of income or expenditure being recorded
Account (Nominal)
Income codes have the form 8nnn
Salary codes have the form 1nnn
Other expenditure codes have the form annn (product code)
Balance sheet codes have the form Bnnnnn
We need a coding structure in order to post or to record a transaction in the finance data base.
The posting string is the code that has to be keyed in when transactions are being recorded.
Split into Account and Sub-Project (previously called Cost Centre)

23. Structure
Sub Project (aaannn-nn) identifies which part of the university ‘owns’ the transaction
Additional codes can be ‘attached’
Trees are used for reporting and analysis
Next area is to identify which part of the University owns the transaction
Might be a specific grant / project or expenditure relating to part of a school or service – eg School Office

24. Structure

25. Transactions What type of transactions? Budgets Actuals
Commitments (orders)
Several different types of transactions :-
Budgets – Plan or expect to spend or hope to earn or receive
Actuals – What you have actually spent – Invoice/journal/purchase card/cheque/ bacs
Orders – Something you have raised a requisition for – After it’s been approved before it’s been invoiced

26. Complicated transactions
Accruals
Prepayments
Deferred Income/Expenditure
Reversing journals
Recharges
Legislation currently states that you should account for the income and expenditure in the period/year that it relates to
Accrual – Eg – Bookcase Order June – Receive July – Invoice Sept
Prepayment – Eg – Subscription to Prof body January to December – Paid in January
Deferred Income/Exp – Grants Matched
Recharges – Expenditure charged directly to one sub-project and then moved/recharged to another

27. Reporting Full picture by Sub Project
Excelerator is our software for producing reports

28. Also another report that you might find useful – Funds Check

29. Where to go for help? Accounting support team
Agresso training and other courses
University web site for Financial Services pages ( – Link to glossary of terms
External web sites
Library texts

30. Accounting Support Team - Structure
Allison Taylor
Management reports
Capital Expenditure
Business
Computing & Engineering
Computing & Library
Diane Webster
Applied Sciences
Art, Design & Architecture
NHS Contract
Cash Flow Forecasting
Statutory Reporting
TRAC
Phil McEwan
Management reports
Music, Humanities & Media
Estates Department
Education & PD
Education Consortium
Nathalie Chavrimootoo
Human & Health Sciences
Service Departments
Research & Enterprise Office
Statutory Reporting
Investment Appraisals