In this posting, we are going to look at the reason for always keeping accounting records and by the bottom of this article, you will have the knowledge so that you can keep a set of books in their simplest form for a firm.
What we need to look at before deciding which bookkeeping technique are best for our business are classified as the following: –
Why do we ought to keep accounting records,
Will be our Business a Small Funds Based Business
3, Will our Business offer Credit rating Terms to Our Customers
Can we get Credit Terms coming from our Suppliers
You may not understand the above terms yet thus let’s look at each thing in detail: –
1 Why do some of us need to keep accounting records-
The first reason we must hold accounting records is that it is often a statutory requirement. At the end of all of our financial year, we have to cause a set of accounts in order to prepare a personal tax return, as well as in the case of limited company data a set of accounts with the Archivar Of Companies. And if I’m registered for VAT we end up needing the information from our files to complete Vat Returns.
Second and the most important as far as I’m concerned is so that we can continue track of where our small business is going: –
Are most of us making a profit or a decline?
Which products within our small business are making a profit in addition to which are making a loss?
Usually, are we in line with the business plan we all put together before we started out our business and performed our initial business analysis?
We may have put together a small business Plan which we took to the Bank in order to get a loan to start out our business. If we performed the chances are that the lender is going to want to see if our enterprise is in line with that anticipate on a regular basis. In other words, the financial institution may ask you to produce Month to monthly Management Accounts”
2 . Will be our Business a Small Funds Based Business?
If we have got only just started our enterprise, maybe it’s a small dog at home business, we probably begin only selling products to opportunity seekers who have paid us initially. Similarly, because we have only started our business most of us probably cannot get consumer credit facilities from our companies so we have to pay cash at the start to get our products. If this sounds the case we only need an easy to use bookkeeping system. All we should instead do is keep track of all of our Cash Receipts and Funds Payments. All we need in this is what Accountants call any Cash Book.
3, Will our Business offer Credit rating Terms to Our Customers?
Once we have products or give you a service whereby we enable our customers or clientele to pay for our product or service later on we are going to need to keep a few records of who is in debt for our money. For example, We are an Accountant and although the majority of my business is money based if I were to maintain your accounting records, I would need to spend time writing up your publications and then producing your trading accounts which I would then evaluate with you. I would have at first spent time on making those documents which I would likely keep a record of and then generate an invoice for you that you would then pay possibly now or in the future. Therefore what I might do is have a guide to keep a record of the purchase. Accountancy Term: – Product sales Day Book And also a document of when you paid me personally for that sale. Accountancy Phrase: – Sales Ledger
4. Do we get Credit Conditions from our Suppliers?
This can be the reverse of item several above. If our manufacturers allow us to have goods that we pay for at a later date then we will need to keep a record of- What we have obtained. Accountancy Term: – Order Day Book and who have we owe money for you too. Accountancy Term: – Order Ledger
So how do we preserve these business records?
Order to answer this question mainly because it will vary for different types of organizations and it is one of the most difficult circumstances to learn as an Accountant once you begin from scratch to put someone’s documents together in order to produce a group of accounts in the quickest period possible.
Once you understand this procedure it is really quite simple. If you want to00 keep your records and let your registrar put your year finish accounts together for you. In case you at least understand the following you will lay aside a lot of money on your accountancy charges because your accountant will charge a person base on the time it requires to analyse your publications in order to put those last accounts together.
So this is actually where we are going to start.
We will start at What info do we need at the end of the day?
We will start by looking at this process by assuming that you keep the simplest list of books discussed in part 1 above (i. age. a Cash Book. Track record of Receipts and Payments) When we say Cash Reserve we mean a record involving Receipts into your Bank Account along with Payments from your Bank Account. Each business will have a dollars book no matter what its dimensions and it is where your Registrar will start when he produces your own year-end accounts or even does your bookkeeping for you.
The reason why?
Because your Bank Statements would be the only independent check that your own records are correct. With this I mean that your Bank Claims are the another (wait for this another) Accountancy Term: — Double Entry to your Money Book. This term Dual Entry is the one almost all feared by anyone commencing to learn accountancy and take that bookkeeping stage to Trial run Balance stage. You don’t need to concern yourself with it so much as a bookkeeper because you are just working on a single record at a time. So what could be the end result that we are hoping for?
Simple. Another Accountancy Period: – Income and Spending Account.
What is this? Simple: rapid
A-List of our Income Through our Cashbook Statements
And a list of our Costs From our Cash Guide Payments
So an income, as well as Expenditure Account, will look like this type of thing: –
Joe Blogs Earnings and Expenditure Account For The entire year Ended 30th April the year 2010
Expenditure Straight Related To Sales: –
Complete Direct Expenditure B+C=D G
Net Income Directly Related to Income A-D=E
Other Expenses: rapid
Rent and Rates S
Heat and Light G
Printing and Invitations I
Sundry Expenses M
Bank Charges M
Lender Interest N
Total Additional Expenses Total F to be able to N= P P
Net gain E-P
Financed by: :
Cash from Bank Q
Capital Launched R
(I use letters in the illustration so that you will see below how totals are used from the fund’s books)
* NOTE:: EXPENDITURE ITEMS CLAIMED NEXT TO BUSINESS INCOME MUST SPECIFICALLY RELATE TO THE BUSINESS.
So if you include or rent an office to your business you can claim often the headings marked with a 3.. If however if you work from your home. You will not be able to claim your residence Rent, Heat and Light as well as your Telephone bills. You could however claim apart on your household bills as a ratio of the time and space familiar with running your business from home. As well as the business-related expenditure on your Telephone calls.
The Rent and also Rates and Heat and light-weight proportion would be claimed beneath the heading: –
Use of Residence as Office.
For this portion, it is best to get advice from your accountant. Topics such as this are usually out of the scope of this article.
Now we know the basic layout for the Cash Book. We will make use of two books, one regarding receipts and another with additional columns for our payments.
FUNDS BOOK RECEIPTS Layout: :
Date______Received From__Total___Sales___Other Receipts
a single July 10________Mr A__________100_____100
several July 10 _______Mr B___________ 25______25
6 July__________ Mister C__________ 50______ 50
several July _________Company D ____250_____ 250
14 July ________Company E____ 100 _____100
20 June Cash Introduced _______1000 __________________1000
Month Total________________ 1525 (Q) ___525 (A) ______1000 (R)
Notice here I have unveiled a heading here that isn’t in the Income and Output Account. This is because these are of a capital nature and are members of the Balance Sheet Part of Your personal Final Accounts. Again it might confuse you and you might require the assistance of an accountant here.
Even so JUST TAKE NOTE OF THE VERY SIMPLE BOOKKEEPING LAYOUT AND TECHNIQUE.
Also notice that when we fill each individual column because we are analysing our individual bills across the cash book titles. If we add together often the totals of each individual spine they should equal the total inside the total receipts column. (i. e. 1000 + 525 = 1525) This is named X casting. It makes positive our book balance.
Also. And by the way, add these kinds of totals up at the end of monthly. That way it is easier to get back together with your cash book with your lender statements.
CASH BOOK OBLIGATIONS Layout: –
___________________Number___Total___Purchases__Carriage__Rent and Rates___ and so on
6 July ____Company X_____100010____100________100
14 July___Company Z_____100011______30___________________ fifty
Month Total ______________________130 (Q) _______(F)_______ (G) _________ (H)
I think you get the theory.
Don’t forget that when you add up often the “Total Column”: – 75 + 30 = one hundred thirty (and of course, you will have considerably more entries than this) Your personal check is to make sure that the sum of each of the analysis content adds across to the identical figure.
i. e. Farreneheit + G + L + etc . = one hundred thirty Great we X forged.
So to summarize.
You now realize how to keep business records in the simplest form. You know experience keeping them. When you first create your business this is probably all you have to start with. When you take these kinds of books to your Accountant all your financial year just about all he needs to do will be balance the cash book develop Bank Statements. And then put together the Income and Expenses Account.
You can see how effortless that is for him to try and do now. He has all the results that just slot in place.. Hey you can likely do it yourself now! Of course, the item gets more complicated than that when we start introducing Gross sales Day Books and Purchase Morning Books.