Accounting For Tax Deductible Expense On Cash Flow Statement The Importance of Bookkeeping in a Business

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The Importance of Bookkeeping in a Business

If you run your own business, regardless of size, bookkeeping is a legal requirement by HM Revenue and Customs.

You should keep basic records

Your basic records will typically include:

  • A record of all your sales, including copies of any invoices you’ve issued
  • A record of all your business purchases and expenses
  • Receipts for all your business purchases and expenses
  • Details of any amounts you personally pay or receive from the business
  • Copies of business bank statements

You or your accountant will use these records to prepare a profit and loss account – which shows the sales revenue you received and the expenses you paid and what profit/loss you actually made. Your tax liability will be based on this.

Other records you should keep

All businesses are different and may require specific types of detailed record keeping. Some examples of records you keep include:

  • cash book
  • Small cash book
  • Order notes and receipts
  • Copy sales receipts
  • Details of any other business income received
  • Details of any private money brought into the business
  • to the rolls or other form of electronic record of sale
  • Details of any other income
  • Any cash withdrawn to pay small business expenses
  • Bills and receipts for purchases and expenses
  • Stock record at the end of the year
  • All bank and building society statements, pass books, check stubs and paying-in slips detailing business transactions

If you don’t keep accurate and complete records you may end up paying more tax than you owe due to a lack of proof of tax deductible expenses or/and incorrect sales records to HM Revenue and Customs assessing your expected sales. If you pay an accountant to prepare your accounts, they will charge you based on how long it takes them. If your records are more accurate, this will reduce the time required and therefore the amount charged.

The above reasons are enough to ensure that you keep good books and records but the most important reason is to ensure that you are in control of your business and that you can assess its profitability and cash flow situation so that you are aware of any potential problems as soon as possible. Businesses can make decisions as much as possible and with all available information.

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