What is bookkeeping?

Bookkeeping is the first stage in Accountancy, it is the recording of financial transactions within a business.

You are recording all of the income and expenditure that relates to your business, the source documents you need to record this information from are:

• Sales invoices

• Purchase invoices

• Credit notes

• Receipts for cash based purchases

• Bills received from utility companies

• Petty cash vouchers

• Paying in slips

• Cheque book stubs

• Statements of account (Bank Account etc)

• Register of payments by standing order or direct debit

• The payroll

It is a legal requirement that these documents need to be kept for a minimum of 6 years. The information on these documents are recorded either on a spreadsheet or in bookkeeping software. If you are a very small business a spreadsheet will suffice. For a larger business with lots of transactions you will be better of using some bookkeeping software.

You need this information to work out your VAT and Corporation Tax. You can work out the profit of your business and always have up to date information on who you owe money to and who owes money to you. This information will help you make informed business decisions.

Filing your paperwork

I would suggest keeping digital copies of all of your paperwork so that you have it to hand without having to dig through arch lever files. HMRC accepts digital format. You can keep hard copies of your documents, this is down to you to decide if you want a digital filing system, a hard copy filing system or both.