What are the methods of bookkeeping?

There are two main methods of bookkeeping that a business must choose from when starting the bookkeeping process:

• Single-entry bookkeeping: This is a simple method of recording financial transactions that requires minimal financial training and no specific software. Each transaction is recorded, often within a cash book, to document incoming transactions and outgoing expenditures. Small businesses and sole traders often use this type of bookkeeping method because of its simplicity.
• Double-entry bookkeeping: Double-entry bookkeeping records both sides of each transaction separately as one debit and one credit. This process aims to create a balanced system where the total credits must match the total debits, which enables checks to be undertaken in order to ensure the accuracy of the data. This method of bookkeeping can be undertaken manually, however, is more commonly completed via the use of accounting software, which can automate some of the processes. Double-entry bookkeeping is often considered more thorough than the single-entry method and is therefore used by larger companies.

What details should be recorded when bookkeeping?

For both single entry and double entry bookkeeping, the following financial information is documented as a minimum:

• The date of the transaction.
• The value of the transaction.
• The description of the transaction.

The description of the transaction should include whether the value is to be accounted as income or expenditure. Details of the category of the transaction should also be recorded, for example, office supplies or training.

Often, there is also a function to input notes against a transaction. Some businesses may also choose to record additional details that they either require or find useful.

Why is Bookkeeping Important?

The process of bookkeeping and accounting is important for businesses because:

It ensures accurate, up-to-date financial monitoring. The data captured within the process of bookkeeping feeds through into a range of financial statements which companies can use to monitor the financial performance of the company and make financial decisions. Moreover, having up-to-date financial records readily available can be useful, should an audit be called, as well as being prepared ahead of tax return deadlines.

It also ensures compliance with Making Tax Digital (MTD): MTD is a government initiative created to transition small businesses and self-employed HMRC submissions to a paperless process. There are various deadlines for entities to comply with MTD, depending on their turnover and VAT registration status. However, Making Tax for Income Tax Self-Assessment (MTD for ITSA) commences by April 2024.

This means that all self-assessments for business or property income of more than £10,000 a year will need to file their returns electronically. In order to comply with MTD, businesses will need to implement an online cloud-based accounting software package that also aids bookkeeping processes.

Accounting Services

We offer a wide range of services to help businesses in all aspects of their financial operations including;

• Business Plans.
• Bookkeeping.
• Year End Accounts.
• Self-Assessment Returns.
• Capital Gains Tax.
• Company and Corporation Tax.
• Companies House Confirmation Statements.
• Companies House Annual Accounts Submissions.
• Landlords Tax.