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A Guide To Keeping Basic Accounts

Discussion in 'Money, Accounts & Finance' started by ladyvgw, Oct 7, 2010.

  1. ladyvgw

    ladyvgw

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    A Guide To Keeping Basic Accounts

    When Do I Start Keeping Records?

    From the day you commence trading. This may be the day you first list your items on Ebay or the first time you place an order for stock, it is not the date of your first sale.

    How Should I Record My Accounts?

    There are 3 ways you can record your accounts and basically it is up to you as to which you will find easiest.

    First - Accounting software that you can buy from Ebay, PC world etc. My preferred one to use is Sage as it is reasonably cheap and user friendly. For just a basic business the Instant Accounts version is perfect but for anything more advanced then other versions might be better suited - http://shop.sage.co.uk/accountssoftware.aspx. Before you just hand over your cash for some software it is worth going into PC World and opening a business account (which is free) which will then entitle you to a discount on a wide range of products.

    Second – Using an Excel Spreadsheet. For those of you that are not experienced with using software such as Sage and are daunted by the thought of trying to work it out then you can use a simple Excel spreadsheet to record your sales, purchases, expenses etc. You can either use your own formulas or there are websites out there that will allow you to download free templates. Here are a few such websites –

    http://www.businessaccountingbasics.co.uk/free-excel-bookkeeping-templates.html

    http://accountswizard.co.uk/index.php?page=downloads

    Third – Use an accounts book. These you can buy in Staples, WH Smith etc and is perceived as being the easiest option but to be honest many people who look at an accounts book for the first time can be utterly confused. Like with anything it takes some time to familiarise yourself with the workings. If you are a bit of a technophobe and prefer doing things the old fashioned way then this may be the best method for you. The most widely used one is called the Simplex D.

    What Receipts And Records Should I Keep?

    The basic answer to this is all of them!!

    If you buy anything related to your business then keep the receipt as you can claim it back as an expense. When I say claim back it does not mean that the taxman just sends you a cheque for all the money that you think you are entitled to, I am afraid it doesn’t work like that. What you do is deduct the total amount of expenses off your bottom line profit for the year thus reducing the amount of tax you pay. Also you should keep a printed record of all sales invoices issued – if you are unfortunate to get an inspection from the tax man then he will want to see a hard copy of these. This includes those of you who sell on Ebay, I would advise keeping a print out of all transactions. It is much easier printing them on a daily basis rather than sitting there for a whole day printing out a years worth!! It is also worth printing out and keeping a copy of Paypal payments into your account as this will show you the fee paid on that transaction which is classed an expense and will reduce your tax bill. Also make sure you back up any records you have on your computer onto an external hard drive just in case you are really unlucky and your computer blows up and your paper files spontaneously combust!!

    You must keep all records for 7 years.

    What can I claim for as an expense?

    The basic answer is anything that you incur in the day to day running of your business. The official term for an expense being allowable is it must be “wholly and exclusively necessary”. To give you an example of this......

    If you are a businessman then you wouldn’t be able to claim for your suit as this would not be classed as “wholly necessary” to your job, you potentially could also use it for going out to dinner or going to a funeral!!

    However if you are a tradesman you can claim for overalls as it is very unlikely that you would wear them out to dinner or to a funeral!

    Here is a list of suggested expenses that you could claim for but obviously it varyies depending on what line of work you are in.

    1. Mileage – There are 2 ways of claiming for the use of your car

    A. You can keep track of every business mile you do and you can claim 40p for every mile up to 10k in any one year and then 25p per mile for everything over 10k in any one year. In addition to this also keep any car park or toll receipts that you have had for business as you can claim for these on top of the mileage allowance.

    B. Keep a record of every single motor expense (petrol, repairs, insurance, tax, parking, breakdown cover, tolls but not fines of any sort!) that you incur during the year and then on your tax return you disallow the private proportion. So lets say you use your car for business 20% of the time and the rest is personal you are only entitled to claim for 20% of the total cost.
    Be warned though that if you are ever questioned on your business mileage you may well need to back it up with proof, for example if your only business use is to go the post office 3 times a week and you claim for 10k business miles/£4k per year then you may well find yourself in hot water!

    2. Printing, Postage, Stationery – remember to keep all these receipts as you can claim for all paper, ink cartridges, pens, stamps, business cards, headed notepaper, notepads for keeping track of your business mileage, envelopes and even the printer itself!
    If you do your postage online through Paypal or Royal Mail you probably wont have a receipt of how much you have spent. To save printing anything else out I personally write how much the postage has cost on top of my copy of the Ebay invoice so that when I am putting into a spreadsheet or Sage then you have all the information in one place.

    3. Ebay & Paypal Fees, Bank Charges - All business Ebay and Paypal fees are allowable expenses so can be claimed for. If you have a business bank account you can also claim for all bank and interest charges incurred.

    4. Telephone & Internet - Obviously if your telephone and internet bills are in the business name then they are 100% allowable expenses.
    If however you run your business from home you can claim for a percentage of the bills. As with mileage above this can be calculated by the proportion of business use versus personal use. Again don’t over egg this too much as it may come back to bite you in the bum!

    5. Utility Bills vs Use Of Home As Office - If you have business premises then all your utility bills are allowable business expenses, I would include in this rent, rates and insurance as well. If you run your business from home then you cant claim any of your utility bills. How much you claim depends on your specific circumstances so I would suggest you have a look at the examples here – www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm and see which ones fits your situation best. Keep in mind that it may look strange to the tax man if you are 16 years old and live with Mum & Dad and you don’t contribute to the household bills!

    6. Sundry Expenses - This is only applicable if you have your own business premises. You can claim for all sorts of things such as toilet rolls, tea bags, bin bags, office heaters, filing trays etc. Basically if you need it in your office then it is a valid expense.

    I think I have covered most bases but if there is anything I have missed or if you have any specific questions then please feel free to ask.

    Vicky :D
    MuddyDave, Sondre, SimonN and 6 others like this.
  2. HomeBargains

    HomeBargains

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    A very informative post, very helpful. Thank you. :)
    Cody likes this.
  3. Redders

    Redders

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    Another classic, Thanks Vicky..............thats helped me out sooo much :welldone:
    Cody likes this.
  4. ladyvgw

    ladyvgw

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    Glad to hear it, I hope people find it useful :)

    If any one thinks I have left anything out let me know and I will add it in.

    Also if you have any ideas of other guides that you think would be useful to do with accounting, vat, tax etc please let me know and I will do my best to write one.

    Vicky :)
  5. ladyvgw

    ladyvgw

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    Hi,

    To all those that have sent me PM's with questions on VAT, expenses etc apologies for not replying yet but I am away for the weekend and my other half keeps telling me off for working so I will reply to all of you over the next few days. I have loads of messages to get through so apologies if I dont reply straight away, I will get to you as soon as I can.

    Vicky :)
  6. UKbuyer1

    UKbuyer1

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    Yet again, another super informative post by the fair lady, who has become a real asset to these forums in such a short time.

    Keep up the good work. And yes, take a day or two off!

    Please PM me what you are taking as I do not know where you find the time nor energy for these posts!

    Rick
  7. successjourney

    successjourney

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    Yep definitely. I'd like to have what she is having! :)
  8. ladyvgw

    ladyvgw

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  9. mastersg

    mastersg

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    THIS SHOULD BE PINNED , I was going to post a question in regards to claiming ebay & paypal fees as an expense , lol , looks like my prayers were answered, thanks so much again LadyVGW
  10. ladyvgw

    ladyvgw

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    You are more than welcome :)
  11. M!k3

    M!k3

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    Thank you this was very helpfull!!!!
  12. Cataclyst

    Cataclyst

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    When keeping receipts, what information do I need to store?

    I presume price, date and item/product.

    Do I need to store their name as well?
  13. ladyvgw

    ladyvgw

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    I wouldnt say that you NEED to record the name but its up to you, if it makes your accounting process easier then go for it but no one is going to penalise your for not recording it.

    Vicky :)
  14. djhawkeye1

    djhawkeye1

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    Hi, I have a question that hopefully somebody can answer please.

    How do I record PayPal fees in my accounts?
    Do I put them as an expense, and if so, is it possible (and necessary) to print an invoice from PayPal for their fees?

    Thanks
    Daniel
  15. ladyvgw

    ladyvgw

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    Hi Daniel,

    Yes it is classed as an expense. There is no need to print out the details of each transaction. What I do is write down the paypal fee on top of the printed invoice so that I have a record of it and all the information is in one place.

    Vicky :)
  16. djhawkeye1

    djhawkeye1

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    Thanks Vicky

    So when I record it on my spreadsheet, should I list the PayPal fee for each transaction as an expense, or could I just put one record for the total PayPal fees for each month, like with eBay fees? Or should the PayPal fees be recorded as a deduction on each transaction on the income sheet?

    Thanks
    Daniel
  17. ladyvgw

    ladyvgw

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    Hi Daniel,

    Personally I record each transaction individually but have realised that this is slight overkill so am now just doing a weekly total which I record as one transaction.

    Vicky :)
  18. djhawkeye1

    djhawkeye1

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    Blimey you reply quick!

    Thanks very much for the advice.

    Daniel
  19. ladyvgw

    ladyvgw

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    Lol, I'm not MOTM for nothing ;)
  20. Cataclyst

    Cataclyst

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    Do I also need to keep a record of what I buy to re-sell for profit? As obviously this isn't an expense.

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