Appropriate Bookkeeping

It’s important to remember that, over and above meeting legal requirements, day-to-day accounts are there to serve the business and not the other way round.

It is not always appropriate to keep full double-entry accounting records.  Indeed, for many businesses, it would be a mistake that would be costly in time and effort for very little return.  Furthermore, for many more businesses, it would be more economical to pay a bookkeeper and/or accountant rather than attempt to do it themselves. 

Also, much meaningful information about a business can be found from simple single entry systems.  As with anything, it’s a question of finding a system that gives the most return for the least amount of time, effort and cost. 

It’s also important to recognise that things change over time, so what might have worked a year or two ago could need updating if things are getting unwieldy.  Don’t be afraid to make changes.

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2 responses to “Appropriate Bookkeeping

  1. Hi Louise,

    I just came across your blog this evening and have found it very useful already. I recently set up as a sole trader in Ireland making websites, and I am trying putting the book keeping / accounting I learned at school and college into practice at last! I am preparing my annual return at the moment, and I was just wondering what would be the appropriate way of accounting for the income tax I will pay. Should I just have a general ledger a/c called tax and treat it like any other expense?? My hunch is that it should be entered differently so that I end up with gross profit – expenses = net profit – tax = profit after tax? I am using a double entry accounts package, so I am trying to set up my accounts the right way so that the reports will end up looking right. I may be back to using paper ledgers and lots of red pen before long 🙂 Thanks for the helpful info!

  2. Hi there,
    I’m glad you’re finding my blog useful 🙂
    sorry for the delay answering your query.

    You are going along the right lines.
    However, remember that tax may appear as a short term liability on your balance sheet as well as in your P&L (reducing your profit).
    Depending on the accounts package, a standard “chart of accounts” normally has the relevant tax ledger codes. If not ensure, that you have a tax liability balance sheet code and possibly a tax code in the P&L range of codes (however, a few packages may allow you to credit direct to the P&L account). You do have to be careful to place the new codes correctly in the “numbering sequence” of the general ledger codes, as otherwise, you are quite right – your reports won’t be right if you make a mistake.

    Persevere with the accounts package for a bit longer. Setting it all up is the worst part.
    (although I do sympathise re the red pen!)