Bookkeeping And Accounts For Small Business

Paul Welwyn

Description

This new edition of A Straightforward Guide to Bookkeeping and Accounts for Small Business has been rewritten extensively and updates essential information and including relevant changes to accounting law and bookkeeping conventions. The book is a practical and informative guide for those who operate small business, either as sole traders or limited companies. With the aid of this invaluable guide, those in business should find the often daunting process of bookkeeping and preparation of accounts made that much easier. No prior knowledge is assumed.

Sujets

• Accounting
• Gestion et management
• Accountancy

Informations

• Publié par: Straightforward Publishing
• Date de parution: 25 janvier 2018
• Nombre de lectures: 0
• EAN13: 9781847168177
• Langue: English

Extrait

A GUIDE TO BOOKKEEPING AND ACCOUNTS FOR SMALL BUSINESS
Paul Welwyn
Straightforward Guides
Straightforward Guides
Straightforward Publishing 2018
All rights reserved. No part of this publication may be reproduced in a retrieval system or transmitted by any means, electronic or mechanical, photocopying or otherwise, without the prior permission of the copyright holders.
ISBN 978-1-84716-762-0 (PDF) ISBN 978-1-84716-817-7 (ePUB) ISBN 978-1-84716-829-0 (Kindle)
Series Editor: Roger Sproston
Printed by 4edge www.4edge.co.uk
Cover design by Bookworks Islington
Whilst every effort has been made to ensure that the information contained within this book is correct at the time of going to press, the author and publisher can take no responsibility for the errors or omissions contained within.
Contents
Introduction
Ch. 1-The Books to Keep
Business activities of a company or enterprise
What information must be kept?
The advantages of a good bookkeeping system
How to record the information you need
Proprietary systems.
The Cash Book System (single entry).
Invoices
VAT
The Double Entry System
Computerized Accounting Systems
Summary of main points from Chapter 1.
Chapter 2-Formulating Accounts-The Double Entry System
What is double entry bookkeeping?
Origins of double entry bookkeeping
In the ledger
Which side should your entry be on?
Assets
Liabilities
Capital
Accounting for purchases and sales
Accounting for expenses and revenues
Accounting for drawings
Debtors
Bad and doubtful debts
Depreciation of assets
A Summary of main points from Chapter 2.
Chapter 3-The Final Accounts
The Trial Balance
Final Accounts
The Profit and Loss Account (Income Statement)
The Balance Sheet
Assets
Liabilities
Capital (Equity)
Summary of main points
Ch.4-Accounting for VAT
The VAT system
Definition of Business
Supply of Goods
Supply of Services
Taxable Supply
Discounts on Taxable Supplies
Time of Supply
Registration
Compulsory
Voluntary
Tax Invoices
Inputs to the Business
Outputs of the Business
Tax collection
Bad debt relief
Accounting for VAT in your books
Ch. 5-Accounting for limited companies
The limited liability company
Limited companies-owners of the company and managers
Financial statements
Limited company capital
Loan capital
Characteristics of limited company accounts
Accounting for share capital
Registered and issued share capital
Share issues
Premiums on shares
The final accounts of a limited company
The published section of the profit and loss account
Balance sheet disclosures
Chapter 6-How the Tax System Operates in the UK and Tax Deadlines
How the tax system works
HMRC
Assessment of taxes-Self Assessment
If you ve been told to send a return
Claiming tax relief
Registering for Self-Assessment
Companies
Keeping records
Inaccurate or late returns
HMRC compliance checks
The Range of Taxes a Business is Liable For
Calculation of income tax for sole traders
Companies and Corporation Tax
The payment of dividends by a Limited Company
Capital gains tax
Capital Gains Tax allowances
National insurance
National Insurance classes
Payment of National Insurance
Chapter 7-Management Accounting
Cash-flow
Budgets
Formulating budgets
Cash flow considerations
Example budget
Budgeting and costs
Costs involved in business
Fixed and variable costs
Semi-variable costs
Selling expenses
Budgeting sales income
Who should carry out the sales forecasting
Creating the budget
Arriving at price-price budgeting
Break even analysis
Calculating the break even point
Internal budgeting-budgeting for expected overheads and capital items
Budgeting for overheads
Rent and rates
Salaries
Stationary
Telephone
Travelling
Insurance
Bank charges
Entertaining
Depreciation
Accountancy and audit fees
Budgeting for capital items
Ch. 8-Monitoring Budgets and Cash flows
Monitoring budgets
Financial ratios for monitoring budgets and cash flow
Profit ratios
The gross profit margin
The net profit margin
The return on capital ratio
Efficiency ratios
The debtor s turnover ratio
The debtor s collection period
The creditors turnover ratio
Creditors payment period
The stock turnover ratio
The average stock holding period
Liquidity ratios
The current ratio
Checking the quick ratio
The security interval
Solvency ratios
Checking gearing
Ch. 9-Using Technology
Using a spreadsheet
Advantages of spreadsheets
Disadvantages of using a spreadsheet
A Sample Spreadsheet
Workbooks

Useful addresses and websites
Glossary of terms
Index
****
Introduction
The world always has been a tough place for businesses and unfortunately many fail. There are many reasons for this. However, apart from the obvious one, i.e. the fortunes of the market, both domestically and globally, by far the most common reasons are internal and are connected with what might be called sloppy management.
Not paying attention to the routine but essential tasks inherent within any business can lead to the unnecessary collapse of a business. This is where bookkeeping and accounts come into play .
Types of business entities
Businesses can be Sole Traders (self-employed individual), Partnerships, (more than one self employed person) a Limited Company (This is a separate legal structure where the liability of owners of the business is limited to the amount of their shares). or a Limited Liability partnership (this has many of the features of a normal partnership-but it is like a limited company in that members of the LLP cannot usually lose more than they invest). Public Limited Companies (PLC s) are not dealt with in this book.
Business control
One common denominator of all these types of business is the necessity to track of all money coming in and going out, whether cash or cheque, where it comes from, where it goes to, how long it takes, what is being purchased and what is being sold.
In addition to managing books and accounts, this book covers basic financial management, the formulation of budgets and management of cashflows. This builds on the actual recording of expenditure. Once the business manager has mastered the art of bookkeeping and accounts and formulation of budgets and monitoring of cashflow then the practice of business management will be that much easier and the prospects of survival that much greater.
It is hoped that the straightforward approach taken in this book helps to shed some light on the art of bookkeeping and accounting.
***************
Ch. 1
The Books to Keep
Business activities of a company or enterprise
Your business activities, in common with all businesses, will consist of selling goods and/or services. At the same time you will have to spend money on behalf of the business, on the purchase or rent of premises, wages or salaries, raw materials, equipment, stationery etc. etc. in order to conduct business.
The main point is that every business transaction generates a financial transaction, all of which must be recorded in books of account on an ongoing basis .
It is a fundamental management requirement that this be done on a regular basis, at a minimum once a week. Leave it much longer, and sooner or later an iron law of accounting will come into operation. You will have mislaid a financial record or simply forgotten to request one or issue one. When you do get around to up-dating the books, they won t balance. Unless you can discover the error before the end of the financial year your accountant, if you have one, will be faced with the task of reconciling incomplete records , which he or she will enjoy because of the professional challenge but which costs you more money for more of his/her time.
What information must be kept?
As a minimum you must keep records of the following: i) All the Invoices raised (or rendered) on behalf of the business, An invoice is a legal document and it constitutes a formal demand for money. It must provide enough information to identify the business which sent it, who it was sent to, what it is for and whether VAT is payable. These invoices should be numbered sequentially. See further on for an example invoice.
ii) All Purchase invoices received, and listed i.e. those demands made on your business for the payment of money.
iv) Wages and Salaries paid, and to whom; Income tax and NI contributions paid over to the Tax authorities. Also, pension contributions.
v) All chequebook stubs, paying-in slips/books, counterfoils of petty cash vouchers, business bank account statements. Without these you cannot compile your books of account.
vi) A full record of VAT, whether paid by or paid to the business.
These records will be kept, initially, in main, or prime, books of account, as we will see .
The advantages of a good bookkeeping system for your business
Following on from this, you need a bookkeeping system that mirrors your day-to-day activity.
The fundamental purpose of a bookkeeping system is :
a) To provide accurate information sufficient to assess whether you are managing the business at a profit or a loss, or whether the business is solvent i.e. is there enough cash available in the business to pay all the outstanding liabilities on demand? The right information of the right kind at the right time is a vital management tool. Good management means making informed decisions of the right kind at the right time based on information that is true and therefore trustworthy.
b) To provide the information required for correct assessments of VAT and Income Tax, so as to avoid financial penalties (and possibly a suspect reputation) for incorrect and/or late payments. HM Revenue and Customs keeps records for seven years. Your accountant will need the best information in order to minimise your tax liabilities, unless of course you decide to submit a stat