The regular recording of a company’s financial transactions is often called bookkeeping. The “books” are source documents every business uses in the course of its daily operations and includes invoices, receipts, bills, cheque stubs, payment vouchers, credit and debit notes.
A business owner or administrative staff needs to record and categorise the company’s expenses, send customer invoices, and record payments received for bookkeeping purposes. On a monthly basis, it is good practice for businesses to conduct bank reconciliations (comparing company records with bank statements), generate monthly financial statements, and process payroll. All these documents are so-called “books” that will help your accountant prepare the four key final documents that regulators require: (a) Statement of Financial Position, (2) Profit and Loss Statement, (3) Cash Flow Statement, and (4) Statement of Changes in Equity.
New business owners are often confused by business, accounting, and financial terms. Two terms that are often incorrectly used interchangeably: bookkeeping and accounting. We already know that bookkeeping is focused on keeping records, but accounting goes one step further. Accountants take your “books” and adjust the entries for income reporting and taxation purposes, as well as analyse operational costs, so owners are better informed when making business financial decisions.
While SME owners are likely to hire administrative staff to handle bookkeeping and external accountants for these purposes, it is still important to have basic knowledge of both bookkeeping and accounting. After all, if there are any discrepancies, it is the business owner who answers to the regulator.
|Invoices||A time-stamped commercial document issued from seller to buyer that itemises and records a transaction. If goods or services were purchased on credit, the invoice specifies the payment terms and methods.|
|Receipts||Issued from seller to buyer, it is an official record that presents proof of a purchase, such as stock inventory from vendors or monthly digital subscriptions from service providers.|
|Cheque stubs||Attached to a cheque, a cheque stub provides details regarding the amount paid. The contents of a cheque stub typically include the invoice number paid and the amount paid, which sums up the grand total paid.|
|Deposit slips||A small paper form that a bank customer includes when depositing funds into a bank account. A deposit slip contains the date, depositor name and account number, and amount deposited.|
|Payment Vouchers||A payment voucher acts as a backup document for accounts payable, or bills owed to your vendors and suppliers, including utility bills, rent, freelancers hired, and stockists.|
|Debit Notes||Typically issued by a seller to a buyer to notify them of current debt obligations.|
|Credit Notes||Issued by a seller to a buyer to notify that credit is being applied to their account, typically in the case of goods that were damaged or returned, services rejected, changes to an order after an invoice was issued, and pricing errors on the original invoice.|
|Bank Statements||Issued by your bank at the end of each month, summarising all transactions in a particular account during the month, including a detailed list of all deposits and withdrawals.|
|Credit Card Statements||Issued by your credit card issuer at the end of each billing cycle, this summarises how you’ve used your credit card during a particular billing period, from payments charged to the card to interest levied and amounts paid down on the balance owed.|
|Loan Statements||Issued by your lender at the end of the year listing all payments you have made towards repaying a particular loan account during the period.|
|Employee Time Cards||A card that prints the hours an employee has worked, based on when they clock in and out to a time clock. Different from a timesheet, which is recorded by the employees themselves.|
Here are six tips to keep your books in tip-top shape for your accountant: