Which Tier 4 category? Sorting your Xero accounts

The cash statement groups every payment in and out of your bank accounts into a fixed set of categories. Here's how to decide where things go, and the mistakes we see most often.

Money received

• Donations, koha, bequests and other fundraising: gifts where the giver gets nothing back, and money raised at fundraising events such as sausage sizzles, raffles, movie nights and gold coin entry.
• General grants: grants to support your work in general, not tied to delivering something specific.
• Service delivery grants and contracts: money you receive in return for delivering specific goods or services agreed with the funder. For example, funding paid per client seen is service delivery; a fixed amount to run a clinic for a year is more likely a general grant.
• Membership fees or subscriptions.
• Sale of goods and services (commercial activities): only trading on commercial terms to make a profit, such as an op shop or café. A sausage sizzle to raise funds is fundraising, not a commercial activity.
• Interest or dividends received.
• Other cash received: small or unusual amounts that don't fit elsewhere, such as an insurance payout.

Money paid

• Fundraising costs: the direct costs of fundraising, such as raffle prizes or hiring a venue for a fundraising dinner.
• Employee remuneration: wages and salaries through payroll, and related costs such as recruitment and training.
• Volunteer related costs: supporting volunteers, such as honoraria, petrol vouchers or thank-you events.
• Costs related to sale of goods or services: the costs of your commercial activities, such as buying stock to sell.
• Other costs related to delivery of entity objectives: the everyday costs of doing your work, such as rent, power, insurance, supplies and administration.
• Grants and donations paid: scholarships, grants or donations you give to others.
• Other cash paid: anything that doesn't fit above, such as interest on a loan or legal costs.

Other activities

Buying or selling investments (shares, bonds), buying or selling assets that last more than a year (computers, furniture, vehicles, equipment), and borrowing or repaying loans go in the separate “other activities” section, not with day-to-day costs.

What never goes in the statement

• Transfers between your own accounts, including moving money into or out of a term deposit. They don't change how much cash you have. Term deposits are shown as part of your cash at the end of the statement.
• Netted amounts. Don't net income against costs. If a fair raised $3,000 and cost $800, show $3,000 received and $800 paid, not $2,200.

GST

If you're GST registered, the usual approach is to show amounts including GST (matching your bank statement) and to show GST paid to or refunded by IRD on its own line. If you're not registered, the GST line doesn't apply.

If you're not sure

The standard lets you use “other cash received” or “other cash paid” when it's hard to decide. Whatever you choose, be consistent from year to year so the figures compare fairly with last year's.

In our app, each Xero account gets a suggested category with a short explanation, and your choices are saved for next year. See when the numbers don't match if your totals don't agree with the bank.