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Company Accounts and Self employed Bookkeeping Software Bookkeeping software for company accounts producing final accounts and self employed bookkeeping systems to produce self assessment tax return. Bookkeeping is the function of recording financial transactions. All businesses are required to maintain financial records of the transactions. Company accounts invariably use a double entry bookkeeping system to maintain financial control while a self employed bookkeeping package can be based upon single entry bookkeeping if a balance sheet statement is not required. Bookkeeping Software for limited companies is based upon double entry bookkeeping
Bookkeeping Software for self employed is based upon single entry bookkeeping
Companies and many self employed businesses use accounts clerks and bookkeepers to enter the financial information. Accuracy is the key to a sound financial accounting system and every bookkeeping system should contain checks and balances to ensure control in which the trial balance plays a vital role. Bookkeeping services are available to organisations often as a stepping stone to appointing full time accounts staff while many self employed businesses do their own books.
The financial affairs of a business involve many aspects of which the starting point is the task of a bookkeeping service whether in house or outsourced is to record the prime documents. Prime documents are the sales, purchases and cash/bank transactions.
The main difference between single entry and double entry bookkeeping is the way the prime documents are recorded. Single entry bookkeeping records each financial transaction once to produce a profit and loss account. Double entry bookkeeping enters the financial transactions twice although the double entry may not be obvious to the uninitiated as bookkeeping software and accounting software typically uses codes to automate the second entry.
It is this automation of the second half of the double entry bookkeeping system that accounting software users may not see and without previous accounting knowledge need to rely upon the accounting software query options to produce financial information. Double entry bookkeeping on spreadsheets has limitations and more suitable for smaller companies and also has advantages in that all transactions and entries into the accounting system are visible and transparent. And it is this transparency that determines less accounting knowledge is required and any transaction can be easily amended or corrected.
Company Accounts Double Entry Bookkeeping
Company accounts use a double entry bookkeeping system for recording transactions to produce both a profit and loss account and a balance sheet. Double entry accounting evolves from the fact that every transaction as a double effect on the business of which there are the three prime financial transactions.
A sale is made creating a record of income for the business on which the business is taxed and the other side of the financial transaction, the double entry, is the organisation who was sold the goods now owes the value of that sales invoice to the business. That is the bookkeeping double entry, record the sales income and also record the debt due from the customer. Someone who owes the business a debt is called a debtor.
A purchase is made creating a record of expense for the business which can be deducted from income and lowers taxes and the other side of the financial transaction, the double entry, is the organisation who supplied the purchase on credit is now owed the money. That is the bookkeeping double entry, record the purchase and also record the credit due to the supplier. Someone who has supplied the business on credit is called a creditor.
The third type of prime transaction is the transfer of money between the debtors and creditors and the business. When a debtor pays his sales invoice double entry bookkeeping adds the money received to the cash or bank records and the opposite double entry goes to the debtor account to reduce the amount owed to the business. When a creditor is paid double entry bookkeeping deducts the money paid out from the cash or bank records and the opposite double entry goes to the creditor account to reduce the amount owed by the business.
Every financial transaction has an equal and opposite entry in the books which a mathematical check called the trial balance ensures that both sides of the transactions add up to zero. Double entry bookkeeping is required for all businesses that require to produce a statement of its assets and liabilities. This statement of assets and liabilities is the total of all the balances from the trial balance and is called a balance sheet.
Limited companies must produce a balance sheet under various financial acts and submit the balance sheet to both Companies House and the tax authority each year. The different rules applying to a limited company is because the accounts including the balance sheet are public records available to the members of that company and not necessarily the property of a single individual or partnership.
DIY Accounting limited company accounts packages have an automated trial balance are based upon double entry bookkeeping principles and also produce the profit and loss account and balance sheet in the format required for publication.
Self Employed Single Entry Bookkeeping
Many small businesses do not require a balance sheet. In the UK the production of a balance sheet is optional for every self employed business as it is not an obligatory requirement of the self assessment tax return form. A self employed bookkeeping system is not required to produce a balance sheet because the business effectively belongs to the owner and is that owners personal business.
The self employed bookkeeping system can be simpler being produced from a single entry style of bookkeeping rather than double entry. Single entry bookkeeping makes a single entry for each financial transaction which is sufficient to produce an income and expenditure account, a profit and loss account, but does not make the reciprocal entry that establishes the value of the assets and liabilities.
Single entry can be as simple as making a list of the sales income and the purchase expenses. Such a bookkeeping system is valuable to the smaller business as it requires little or no bookkeeping or accounting knowledge. A smaller business can produce its own accounts without the need for a bookkeeper or accountant particularly if it has access to bookkeeping templates through bookkeeping software to produce the accounts in the accounting format required. That essential format for a self employed business is the self assessment tax return.
DIY Accounting single entry bookkeeping software produces the accounts in the accounting format required to automatically complete the self assessment tax return for self employed.
Bookkeeping Articles
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