Record Keeping

The records your
business should keep


	The basic need to keep records Filing Sales Purchases Book-keeping N/L codes			If your business turns over £1 or one million, you must keep some kind of formal day-to-day accounting record of the income as it comes in, and the expenditure as it goes out. It also helps to know what you have in the bank account, before the bank manager writes to inform you that your account is overdrawn. Apart from your very real legal obligation to do so, it is in your best interests to keep proper accounting records. If you do, you will be able to identify at any point in time: How much profit you have made The amount your clients owe you (sales ledger debt) How much you owe to others (trade creditors, staff salaries and of course tax), and The net book value of the business (total assets less total liabilities) Most people have an instinctive 'feel' for how well their business is performing. Instinct is not enough, however, to help you make the everyday business decisions on a sensible, informed basis. You will be surprised how many profitable businesses fail in the first two years of trading, because the owners did not pay enough attention to cash flow considerations. It makes sense to design a simple accounting system, that will provide you with the information you need to control your profitability and your day-to-day working capital requirements. For each kind of transaction group, for example sales or purchases, we have provided clear guidelines on the information you need to record, and even how to file the related documentation. It does not matter whether you prepare your own accounting records, or if you rely upon us to do the same, the guidance provided here explains how to build up a simple system that will help you run your business more effectively.
	Proper accounting records			In spite of the fact that many references are made to the obligation of traders to keep proper accounting records, there is surprisingly no formal legal definition of what exactly constitutes 'proper' accounting records. Rest assured, however, you will get into trouble with the Inland Revenue for not keeping them! In the absence of any other definition, we suggest you take 'proper accounting records' to mean: The various ledgers, documents, receipts and invoices, when taken collectively as a whole, will identify the source, purpose, destination and timing of every single transaction that occurred in connection with the carrying on of the trade of the business under review, over a finite period of time usually taken to be one year. Most business people seem to have few problems in creating a filing system to store all of the sales invoices they raise, and the suppliers' invoices they receive. It is when they come to devising methods of keeping a daily record of their income and expenditure that matters can become a little more complex. Over the next few pages we will suggest a few basic ideas about what you can do in the following areas: The organisation of your filing system How to record Sales How to record Purchases A basic introduction to double entry book-keeping A suggest nominal ledger account coding list It should be stressed that the suggested methods we now go on to describe are not the only way of doing things. We can only hope to lay down a foundation upon which to build a system of accounting that will suit the circumstances of the business itself. It is also the case that the general rules we lay down here, apply as much to manual book-keeping as it does to fully computerised systems.