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OnTax Accountant In Dunfermline Discuss:

Book-Keeping - What Exactly Is It?

As A Helpful Accountant In Dunfermline We Thought We'd
Go Back To Basics & Look At Book-Keeping

What Is Book-Keeping?

Accounting Question

We love book-keeping at OnTax Accountant In Dunfermline. But book-keeping can conjure up all sorts of mental imagery, from piles of messy paperwork to spreadsheets with neat columns. 

What really is book-keeping and how involved with it do you need to get? The answer may well surprise you..

Doing Book-Keeping Yourself Is Cheaper...But...

As an Accountant In Dunfermline, OnTax, are often told by clients that they will do the book-keeping themselves. When pressed further these clients will admit they have neither qualifications or experience in book-keeping. To them, book-keeping is merely listing costs under headings.

If it were this simple one would wonder exactly what accountants study for 6 years at college or university! The truth is, book-keeping is a very complex subject requiring the skills of someone who has studied and qualified in book-keeping and can ensure that your job is correctly processed to comply with all relevant laws.

Book-keeping, undertaken incorrectly, can result in huge tax & vat liabilities building up in the background, unknown, until HMRC inspect your books, at which point the full horrors of up to 6 years prior can emerge. The resulting tax bill could potentially bankrupt you.

It's a bit like changing the brakes on your car, anyone can do it, but is it done properly? Will there be consequences for saving money and attempting it yourself?

The Importance Of Book-Keeping

Blog Advice

Here at OnTax Accountant In Dunfermline , Book-keeping starts with ensuring you have all the required paperwork for the financial period to hand. Often, organizing or collating it can take very many hours. Opening entries are first made. These could be customer/supplier balances as well as nominal entry balances. Typical opening entries would include bank balances, directors loan account, fixed assets etc.

The paperwork is then processed. This might involve classifying each entry under a specific income or expense category, as well as supplier/customer and various other data. Following this, the bank is then reconciled. This means that every entry in the bank is assigned to either a customer/supplier account or perhaps to a nominal ledger account (i.e a cost or income account).

Once this step is undertaken each of the customer/supplier accounts will be cross-reconciled to ensure the closing balance is correct.

It's important to know that the book-keeping needs to be undertaken in full "double entry" format i.e for every entry there is an equal and opposite entry. Assets result in increasing liabilities (to loan companies or as a reduction in the bank). Similarly, costs result in liabilities to creditors and sales in an increase to current assets, the customers.

The final step would be to cross check the nominal ledger balances to ensure that everything is accounted for, accurately recorded and then audited by OnTax Accountant In Dunfermline.

Ensuring your business records are correctly kept is a wise investment of time and resources. HMRC are renowned for their ruthlessness when inspecting taxpayers books, so having books that show you have correctly worked everything out instill confidence on the part of the inspector and likely will result in a trouble-free visit.

When you started your business, it was not to become your own web designer, your own cleaner, your own mechanic and your own accountant. Rather, outsourcing these tasks to those that do them for a living will ensure that you have the time to focus on what really matters, that which brings the sales in.