Blog has moved

Firstly, apologies for the rather large time-delay in posting.  I am attempting to catch up!  You can view the new blog (which is being slowly updated) at www.happyaccountant.com
If you are linking to or blogrolling “The Happy Accountant”, please update your links.
Also, if you are blogging on a relevant or related topic (such as tax, spreadsheets, marketing, [...]

Goods Written Off or Goods Written Down

Sometimes, goods might be unsaleable for one of the following reasons:

the goods might be lost or stolen
the goods might be damaged, and therefore worthless
the goods might become obsolete

When goods are lost, stolen or disposed of, the business will make a loss on them, because they will have zero sales value.
Similarly, if goods become obsolete and [...]

Carriage

Carriage is the cost of transporting goods from the supplier to the business which has purchased them.  Sometimes the supplier pays and sometimes the buyer pays.
If the supplier pays, the cost to the supplier is called “carriage outwards” and if the buyer pays, the cost to the buyer is called “carriage inwards”.
Carriage inwards is usually [...]

Cost of Goods Sold

The cost of goods sold is calculated as follows:
                                                                                                       £ 
Opening stock value                                                                  X
Add cost of purchases (or production, if manufacturing)    X
Less closing stock value                                                         (X)
Equals cost of goods sold                                                         X
 That is, to match sales and the cost of goods sold, you need to adjust the cost of goods sold, to allow for increases or decreases [...]

Unsold Goods at the end of an Accounting Period

Goods may be unsold at the end of an accounting period and therefore, still be in stock.  The purchase cost of these goods should therefore NOT be included in the cost of sales of the period.
For example, suppose Widgets & Co (who have no stock at the start of the year) purchase 40,000 widgets for £20,000 [...]

Choosing an Accounts Package

I’ve recently been in the position of choosing accounting software, so this has been forefront of my mind.  This is a (by no means exhaustive) list of things to consider (in no particular order). 

price
functionality
ease of use/user friendliness
accounting knowledge
upgradeability
upgrade cost
ongoing support costs
flexibility
does it meet your legal obligations

Why use Accounting Software

The whole point of using accounting software is to make your life easier by saving you time and money.  Therefore, if it doesn’t and you can meet your legal requirements without it, you should question whether it’s worth the effort.
It should save you time because:

the whole process of bookkeeping should be faster (although setting up a [...]

Following the Trail of Journals

In doing a journal, it is important that it is cross referenced properly so that later, if you or your accountant needs to, you can follow the original “logic” for having done the journal.  Accountants refer to this as being able to follow the audit trail.  This applies whether or not you actually have your [...]

Correction of Errors using a Journal.

A journal is usually used to correct errors that have been made.  The errors must be able to be corrected by means of a double entry, to be able to put it right by journalling.
So, if £500 of sales of square widgets had been incorrectly posted to sales of round widgets, the correcting journal would [...]

Day Book Analysis and Journals

I’ve previously blogged about day books and analysing the sales or purchases into appropriate columns.  Depending on your business and grasp of accounting & bookkeeping, you might leave your record keeping at that.  However, to take it to the next step in terms of bookkeeping, a journal is used to take that analysis into the [...]

Journals

A journal is used to record any double entries that do not arise from anywhere else (such as sales, purchases, payroll).
The format of a journal is usually:
Date                                             Folio              Debit £   Credit £
Account to be debited                                          X
Account to be credited                                                         X

Double Entry for a Credit Sale II

When the customer eventually pays, the second stage of double entry is as follows:
CASH ACCOUNT
Debit £200
DEBTORS ACCOUNT
Credit £200
Therefore, the two entries in the debtors account will eventually (hopefully!) cancel eachother out.  Since, in the first stage 9the actual sale), there was a debit of £200 and in the second stage (when payment is made), there [...]