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Set Up a Successful Small Business: Book-keeping and accounting

by Vera Hughes and David Weller

Book-keeping and accounting are two different and distinct aspects of financial transactions. Book-keeping is about ‘doing the books’, keeping strict and accurate records of all day-to-day transactions, doing VAT returns (if your turnover is £68,000 or more – 2009 figures) and paying wages if you employ others.

Your book-keeping activities will include records of all moneys coming into the business, through sales invoices, cash, cheque and credit card transactions and capital introduced. Your outgoings will include all bills you have to pay to run your business, such as materials, items of equipment, rent, rates, insurance, travel, heating, lighting and phone bills. Petty cash items must also be accounted for. These transactions are most likely to be handled electronically, giving an automatic audit trail for your accountant and HM Revenue and Customs.

Accounting is drawing up your end-of-year Income and Expenditure Accounts, submitting these to Companies House if you are a limited company, and probably doing your income tax returns.

Your accountant will need all your financial transaction records for the whole of your financial year, including bank statements, receipts, copies of invoices sent out and paid and the drawings or fees you have taken out of the business for yourself.

If you are able to cope with this side of the business yourself, fine. However, most small businesses employ an accountant and many employ a book-keeper, particularly if they employ others or whose business affairs are complicated.


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