A short discussion on bookkeeping and accounts.
Bookkeeping becomes accountancy when figures are transferred from books and ledgers, via the “Trial Balance” to Financial Statements. Such as “Balance Sheet” and “Profit & Loss”. You’ll be aware that a sheet of bookkeeping data is traditionally referred to as “a Folio”. In the UK, limited companies are responsible for submission of business accounting statements, usually Balance Sheet & Profit & Loss Statement (I think the latter, other additional statements, such as a Directors Statement can be added).
In England & Wales, this is supervised by “Companies House”, a branch of government. You can’t just adopt the title “Limited” without first registering the company name with them. It costs about £qw, plus annual submissions of “Articles of Registration”. I imagine, a company needs to be located in registering country, or have “an Agent” there, to represent the company. There are fines, for non compliance. Directors may be held liable for dangerous, or dishonest acts. A company can be sole or partnership. When you’re earning. Its necessary to register for taxes.
To dissolve a company, a DS01 needs to be submitted to Companies House, plus £10 or £12 dependent on method (post or online). A DS01 also needs to go to HMRC. I think the Crown receives any unclaimed company assets. A company ceases to exist on the death of the Director(s)..
There is a list of approved accounting packages listed on HMRC’s website. Though these are fairly straightforward to use. You’d still need theoretical accounts knowledge. These approved packages offer MTD, Make Tax Digital. Its HMRC’s way of helping both keep track of tax, in real-time.
You’ll know to get a business bank account, approval of a landlord, and to inform your local council. A bank may provide a business guidance worker.
I’ll mention “Bank Reconciliation”. This is where you match corresponding Bank transactions in your books to your Bank Statement. Crossing each off (in pencil), to see what has and hasn’t cleared.
Invoices are requests for payment. They need the title “Invoice” written,”Supplier name”, “Customer name”, “Suppliers tax reference” “Date”,”Items suppled”, “Cost of goods sold”, and “Payment method”. Similarly, “a Credit note” is a refund on an invoice. It covers same details, but is a debit to the purchasers books for that client.
Debits are positive assets of a company. I know, we say “I’m in credit with the bank”, meaning we have money. The word credit is the opposite to debit. But, banks say credit, as they owe the money. Understood? Yeah, its confusing.
A Day Book records Sales or Purchases prior to transferring to Ledgers. A bebit would appear on left-hand side, a credit on the right. Each credit would correspond to a debit in a different book. And vice-versa. For example, on 1st April 2022, Jeff pays £10 off his account debt by cheque. Credit Feff’s account (he owes us less), debit Bank (we received the cheque). That’ “Double Entry Bookkeeping”. (Accounting books written by Wood & Sangster explain in fantastic detail). At the end of the accounting period, balances are brought down & carried down c/d and b/d. Don’t ask which is which, I always get confused.
The sum either debit or credit gets carried over to the Trial Balance. A credit in so doing, becomes a debit (from c/d). All the credit side+debit side, Trial Balances. If not, there are bookkeeping errors.So, errors need to be found and corrected. The posting needs to be noted in the Journal ( a book that is intended to note changes to books after errors in posting). If all errors can’t be found, then (perhaps) “a Suspense Account” might allow temporary correction of an unknown error?
The Balance Sheet is always titled as such. The company name sharing prominence in title too. Also, date of preparation.
E/G.
A Company Ltd
Balance Sheet As of 31st December 1999
Assets are listed in increasing liquidity:- £ £
Fixed Assets
Land
Machinery
Furniture
Current Assets
Stick
Debtors
Cash at Bank
Cash in Hand
Toral A
Liabilities also listed in terms of liquidity
Liabilities
Bank Loans (L)
Capital C
Assets-Liabilities=Capital, by “Accounting Equation”
This may be positive or negative/
Totala; C=A-L
The Profit & Loss Statement, I can bever remember. Just that, what’s left over of Trial Balance after Balance Sheet entries goes in P &L/
Author, Dabid Townsend AMBCS, MInstAM (Ryd)
16th December, 2021 appx 20.10 hours GMT
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