Monday, 12 January 2015

Keeping the Books

The importance of keeping good accounts

Accounting is a way of measuring and recording financial activities for your enterprise. There are two reasons for keeping accounts:

  • you have to because you are obliged by law, (HM Revenue and Custom), and depending on your legal structure to account for the way you spend money
  • you will find it useful because keeping accounts will give you the daily information as to whether or not you have been paid by your customers and have paid you're your bills For both of the above reasons you and the law will also want to know if you are:- under spending, which leads to making profit or over spending, which can lead to going broke.

How and what records to keep

Depending on the size, type and legal structure of the enterprise being operated there are many varied systems that can be adopted. The proposed system operates on the KISS basis, (keep it simple sister).

Whatever you decide upon do CHECK with your accountant that s/he is in agreement.

Key records you should keep

  • Wages records - when employing people it is essential that records be kept.
  • Sales records - a copy of every invoice issued or sales made should be kept and recorded
  • Purchase record - an invoice or receipt for every purchase made must be retained and recorded
  • Cash Book - in this context cash means all money in and out however transactions are made. It is a simple summary of transactions of money received and money spent, as above
  • Petty cash records every transaction for whatever the expense and should be accompanied by a docket and recorded.
  • VAT records - if registered it is a requirement to keep a VAT account.
  • Bank Statements - all bank statements should be kept as without them the books cannot be reconciled

Hints and tips for better book keeping

Here are a few suggestions for keeping records and handling money with confidence.
  1. Keep all financial information filed in order. You will find this helpful and so will your accountant/auditor.
  2. Keep incoming money separate from outgoing money unless you are in a retail enterprise.
  3. Bank all incoming money as soon as is practicable.
  4. Always give and retain receipts.
  5. Keep an inventory of all equipment purchased.
  6. Keep minutes of meetings, especially details of financial decisions.

Posted by: Ashford Place