March 16, 2011 in Basic Skills, Development, Reference, Relaxation, Startup
We have often been asked for a list of books that are useful whether you are new to business or just wanting to update a few of your ideas – here are a few we have slected for you – hope they are useful – feel free to add more in the comments section – and if we agree, we will add the links here 
February 14, 2010 in Basic Skills, Development, Startup
Robert Ashton, is an entrepreneur, and challenging
business author. His books including 'How to Sell'
are published by Hamlyn. Visit www.robertashton.co.uk
to find out more.
Robert kindly agreed to contribute a regular column
to ‘Wising UP!’ so this was the first of of our
“Ten Ways...” series from the first issue of Wising
UP in 2003! - as useful now as when first published.
It’s all too easy to assume that everything’s going to turn out just fine. But the wily entrepreneur makes sure he’s chosen the right eggs to sit on. Here are ten ways you can be sure you’re hatching winners!
August 4, 2009 in Basic Skills
The Financial Year End. Each and every Limited Company trades for a period of One Year, this can be of 12 Calendar months or 13 ‘Lunar’ Months, a ‘Lunar’ Month consists of Four weeks only, at the end of which it has to present a ‘Set of Accounts’ to H.M.R.C. and Companies House. As an employee you will have to prepare your ‘Final Accounts’, or assist in their preparation, from the balances shown in your Trial Balance. From this point on if you make any mistakes you need backtrack only to the ‘Trial Balance’.
The Profit and Loss Account includes such items such as ‘Sales’, ‘Purchases’ and ‘Direct Expenses’ such as Promotional and Miscellaneous Expense are shown in one part whilst the second part bears the Overheads such as Licence Fees, Motor Expenses, Printing & Stationery and Postage & Telephones to name a few. The sum arrived at by deducting Purchases & Direct Expenses from your Sales income would form a Sub Total to which would be added to, or subtracted from, the total of the ‘Overheads’ to give you a nett Balance on your Profit & Loss Account.
The Balance Sheet is the Final Account to be drawn up for the Year End. It consists of your ‘Fixed Assets’ such as ‘Office Equipment’, ‘Furniture & Fittings’, ‘Motor Vehicles’ where they are the Property of the Company, to name a few and the respective Depreciation Accounts. To these are added your ‘Current Assets’ such as your ‘Debtors’, ‘Bank Account’ and ‘VAT Liability’ and the sum total of these two categories becomes your ‘Total Assets. The next sum would be ‘Current Assets less Current Liabilities’ which is deducted from, or added to, your ‘Total Assets’ and is shown as ‘Total Assets less Current Liabilities’. To Balance your ‘Total Assets Less Current Liabilities’ you need to show on the opposing side of your Balance Sheet the figure you have for ‘Reserves’ plus ‘Profit & Loss Account’ which is the Balance of that Account within the Nominal Ledger.
August 4, 2009 in Basic Skills
The Nominal Ledger. This is a collection of individual accounts in which the Income and Expense, including the Operating Costs, of the Company are recorded and which provides an overview of the activity of the Business. It is also from this Ledger that the Trial Balance and the Final Accounts of the Company are prepared with one set being sent to Her Majesty’s Revenue & Customs and a second set to Companies House. The term ‘Final Accounts’ refers to ‘The Trading and Profit and Loss Account’ and ‘The Balance Sheet’, it is these which are sent to H.M.R.C. and Companies House and is a requirement of Law.
In the ‘Month-end’ Accounts regarding the Nominal Ledger all entries are posted to it by a Journal Voucher. This entails going through each ‘Day Book’ and Cash Book and completing the Journal Voucher by entering on to it the Totals of each column or, in the case of the ‘Sundries’ column, the individual amounts against their Nominal Code numbers and ‘posting’ these entries to the Nominal Ledger account. Sample vouchers are shown below:-
| Journal Voucher:- 12/01 | Date:31.12.06 | |||
| A/c Number | Description | Posted by | Debit | Credit |
| 2100 | Purchase Ledger Control | £ 2,000.00 | ||
| 2200 | V.A.T. Control Account | £ 250.00 | ||
| 0030 | Office Equipment | £ 400.00 | ||
| 7500 | Postage | £ 25.00 | ||
| 7501 | Phones | £ 300.00 | ||
| 7504 | Stationery | £ 125.00 | ||
| 6200 | Advertising | £ 500.00 | ||
| 7800 | Cleaning & Heating | £ 400.00 | ||
| Totals | £ 2,000.00 | £ 2,000.00 | ||
This Journal Voucher covers items taken from the Purchase Day Book.
| Journal Voucher:- 12/02 | Date:31.12.06 | |||
| A/c Number | Description | Posted by | Debit | Credit |
| 1100 | Sales Ledger Control | £6500.00 | ||
| 2200 | V.A.T. Control Account | £960.00 | ||
| 6200 | Display Equipment | £5540.00 | ||
| Totals | £6500.00 | £6500.00 | ||
Whilst this one relates to the Sales Day Book
| Journal Voucher:- 12/03 | Date:31.12.06 | |||
| A/c Number | Description | Posted by | Debit | Credit |
| 1200 | Total Receipts | £ 12,000.00 | ||
| 1100 | Sales Ledger Control | £ 12,000.00 | ||
| 1200 | Total Payments | £ 5,000.00 | ||
| 2200 | V.A.T. Control Account – Payment | £ 500.00 | ||
| 0030 | Office Equipment | £ 3,500.00 | ||
| 7100 | Office Rent | £ 1,000.00 | ||
| Totals | £ 17,000.00 | £ 17,000.00 | ||
This Journal deals with the items in the Cash Book
| Journal Voucher:- 12/04 | Date: 31.12.06 | |||
| A/c Number | Description | Posted by | Debit | Credit |
| 1230 | Petty Cash Control | £ 76.38 | ||
| 2200 | V.A.T. Control | £ 11.38 | ||
| 7510 | Stationery | £ 25.00 | ||
| 7500 | Postage | £ 5.00 | ||
| 6100 | Copying | £ 35.00 | ||
| Totals | £ 76.38 | £ 76.38 | ||
And finally, this covers the Petty Cash Book expense.
There may be other Journal Vouchers you may need to raise, for instance – Depreciation, and that may well cover more than one account in the Nominal, then there may be Pre-payments which require a Journal Voucher.
When all the Journal Vouchers have been ‘posted’ to the Nominal Ledger you then go through this Ledger balancing each individual account or ‘Ruling off’ where there is no balance.
Once you have finally balanced each and every Account in the Nominal Ledger you then have to prepare a Trial Balance – I should add here that when I had to produce ‘Month End Accounts’ the Trial Balance was the final point. This is a List of the Balances extracted, by Account number and Name, and listed as a schedule showing the Debit Balances in the left-hand monetary column with the Credit Balances shown in the right-hand column.
The Totals of both the Debit and Credit Columns MUST be the same – if not, you have then to begin checking all your entries from the beginning in order to find the mistake. One of the most common of errors is ‘Transposition’, this is usually in the ‘pence’ of an entry such as writing £89.92 as £89.29 which would give you discrepancy of .63, another is posting entries, from the Journal Voucher, on the wrong side such as an item of £100.00 shown on the Journal Voucher as a Credit which was posted as a Debit, your difference here can be £50.00 or £200.00, either way, the error has to be found and corrected.
The last thing to do in the Nominal Ledger is to ‘close and transfer’ all expense accounts EXCEPT those relating to the Asset Accounts and their Depreciation Accounts. This is done via journal entry on which you list all the balances as Debits and Credits which close the individual accounts with the Total of all the entries being posted to a ‘Profit & Loss Account’ within the Nominal Ledger. It is this total that you show on your Balance Sheet with ‘Reserves’, and which should balance your ‘Balance Sheet’.
August 4, 2009 in Basic Skills
The next thing we look at is the ‘Month-end’, a lot of companies ‘close’ their accounts at the end of each month, this is purely an accounting exercise so that the Director(s) and the Accountant can see how the company is progressing and what measures, if any, need to be taken. It is also helpful in relation to preparing Year End Accounts.
The first thing that must be done is to go through the Purchase Ledger and balance each of the accounts which appear in them. These samples give an idea as to what should be done and what to expect.
| William Bloggs & Son | A/c No. B.2 | |||
| Date | Detail | Folio | Debit | Credit |
| 1 Jan 2006 | Invoice 26584 | pb 1 | £ 28.15 | |
| 3 Mar 2006 | Invoice 32000 | pb 20 | £ 140.00 | |
| 10 Mar 2006 | Credit Note 2600 | pb 24 | £ 26.00 | |
| Sub Totals | £ 26.00 | £ 168.15 | ||
| 31 Mar 2006 | Balance | c/f | £ 142.15 | |
| Totals | £ 168.15 | £ 168.15 | ||
| 1 Apl 2006 | Balance | b/f | £ 142.15 |
In the case of the account of William Bloggs & Son when January and February accounts were prepared there was no necessity to ‘balance off’ in this manner as the £28.15 shown as a January purchase would have sufficed as it was.
| J. Henderson Co Ltd | A/c No. H.4 | |||
| Date | Detail | Folio | Debit | Credit |
| 2 Apl 2006 | Invoice H.1425 | pb 30 | £ 1,500.00 | |
| 10 Apl 2006 | Invoice H.1460 | pb 33 | £ 750.00 | |
| 21 Apl 2006 | Invoice H.1523 | pb 35 | £ 2,500.00 | |
| 30 Apl 2006 | Cheque 550063 | cb 15 | £ 4,850.00 | |
| Sub Totals | £ 4,850.00 | £ 4,750.00 | ||
| 31 Apl 2006 | Balance | c/f | £ 100.00 | |
| Totals | £ 4,850.00 | £ 4,850.00 | ||
| 1 May 2006 | Balance | b/f | £ 100.00 | |
In the case of J. Henderson, you will see the balance brought forward is shown on the Debit Side, this is due to an error in calculation and will be put right when the next payment made will be this amount short. Having completed going through the Purchase Ledger you will need to prepare a schedule of Debtors showing how much is due to each Supplier, this means compiling a list and going thru the Purchase Ledger extracting only the balances, this is completed in the manner of an ‘Analysis’ where you show the debt to due to each of your Suppliers by individual month and the Total as shown in the following example.
| Schedule of Debtors @ 31 January 1990 | |||||||
| A/c | Supplier | Oct ’89 | Nov ’89 | Dec ’89 | Jan ’90 | Total | |
| A.1 | Ayres & Co, | £ - | £ 14.00 | £ 25.00 | £ - | £ 39.00 | |
| C.4 | Charlton’s Ltd | £ 30.00 | £ 25.00 | £ - | £ 40.00 | £ 95.00 | |
| F.2 | Fredericks& Co | £ - | £ 40.00 | £ - | £ - | £ 40.00 | |
| Totals | £ 30.00 | £ 79.00 | £ 25.00 | £ 40.00 | £ 174.00 | ||
You will need to keep this to hand for when you begin to Balance the Purchase Control Account in the Nominal Ledger. The Control Account should agree with this Schedule, if it doesn’t you will have to back track to find the discrepancy correct the error.
Having finished with the Purchase Ledger, the next thing to look at is the Sales Ledger and, again, we repeat the exercise of balancing each of the accounts. These two samples hopefully will give you an idea as to what should be done and what to expect, for the second of the two is not straightforward.
| Peters & Riley | A/c No. P.3 | |||
| Date | Detail | Folio | Debit | Credit |
| 10 Jan 2006 | Invoice 62000 | sb 12 | £ 1,500.00 | |
| 14 Feb 2006 | Invoice 62201 | sb 20 | £ 1,250.00 | |
| Sub Totals | £ 2,750.00 | |||
| 28 Feb 2006 | Balance | c/f | £ 2,750.00 | |
| Totals | £ 2,750.00 | £ 2,750.00 | ||
| 1 Mar 2006 | Balance | b/f | £ 2,750.00 | |
| 10 Mar 2006 | Payment Received | cb13 | £ 2,750.00 |
Here we had the months of January and February Invoices due and the account was balanced as shown with the balance being settled in March.
| J. Ryker & Co | A/c No. R.10 | |||
| Date | Detail | Folio | Debit | Credit |
| 14 Feb 2006 | Invoice 62202 | sb 20 | £ 4,000.00 | |
| 20 Feb 2006 | Invoice 62400 | sb 22 | £ 5,500.00 | |
| Sub Totals | £ 9,500.00 | |||
| 28 Feb 2006 | Balance | c/f | £ 9,500.00 | |
| Totals | £ 9,500.00 | £ 9,500.00 | ||
| 1 Mar 2006 | b/f | £ 9,500.00 | ||
| 3 Mar 2006 | Part Payment | cb6 | £ 8,750.00 | |
With this account you will see that only two Invoices were ‘posted’ in February with the Account ‘balanced off’ at the close of February. Subsequently there was a partial payment of £8750.00 received against this account which would indicate that there is a query or problem running which you would need to know about.
As with the Purchase Ledger, having balanced each of the Sales Ledger Accounts you will need to produce an ‘Age Analysis’, this is a list of the customers who have yet to settle accounts with their debt shown in total and then extended out to individual months. This helps when letters are sent to remind them of their debt. Again, it would be wise to keep this to one side with the Purchase Ledger list of balances until you get into the Nominal Ledger.
| Age Analysis @ 28 February 1993 | |||||||
| A/c | Client | Nov ’92 | Dec ’92 | Jan ’93 | Feb ’93 | Total | |
| J.2 | Jenkins & Sons | £ 200.00 | £ - | £ - | £ - | £ 200.00 | |
| L.2 | James Leslie Ltd | £ - | £ 125.00 | £ 55.00 | £ 60.00 | £ 240.00 | |
| P.5 | Peters & Co. | £ 15.00 | £ - | £ 95.00 | £ - | £ 110.00 | |
| Totals | £ 215.00 | £ 125.00 | £ 150.00 | £ 60.00 | £ 550.00 | ||
Again, you will need to keep this to hand for when you begin to Balance the Nominal Ledger, as the Sales Control Account must agree with this Analysis and if there is a difference then you will have to find the error and correct it.
You will also need to agree the ‘Cash Control Account’ to the Balance shown in the Cash Book. Again, if there is a discrepancy it must be found and corrected.
With regard to the V.A.T. Control Account if the majority of your clients are within the U.K. I would normally expect you to be paying V.A.T. For a Governmental form this is one of the simplest forms any Government has produced. In order to help I have shown a ‘dummy’ which I have used in the past:-
| V.A.T. Summary for the period:- …………………………………….. | ||||||
| VAT on Sales | ||||||
| Jan | £ | |||||
| Feb | £ | |||||
| Mar | £ | |||||
| £ | ||||||
| VAT on Purchases | Jan | £ | ||||
| Feb | £ | |||||
| Mar | £ | |||||
| £ | ||||||
| VAT on Petty Cash | Jan | £ | ||||
| Feb | £ | |||||
| Mar | £ | |||||
| £ | ||||||
| Amount due to or from H.M.R.C. | £ | |||||
| Total Sales | Gross | VAT | Nett | |||
| Jan | £ | £ | £ | |||
| Feb | £ | £ | £ | |||
| Mar | £ | £ | £ | |||
| £ | ||||||
| Total Purchases | Jan | £ | £ | £ | ||
| Feb | £ | £ | £ | |||
| Mar | £ | £ | £ | |||
| £ | ||||||
| Total Petty Cash | Jan | £ | £ | £ | ||
| Feb | £ | £ | £ | |||
| Mar | £ | £ | £ | |||
| £ | ||||||
| £ | ||||||
As you can see, the amount of VAT you have charged your clients for the months shown is entered against the respective month and then totalled. You treat the VAT on Purchases and Petty Cash in a similar manner. Normally your VAT on Sales would exceed the VAT on Purchases and Petty Cash in which case the total shown against “Amount due to or from H.M.R.C.” would be payable to them. The second part of this form should help with the second half of the Return, you simply enter the Total and VAT amounts from your Sales Day Book and calculate the ‘Nett’ amount for each month and then repeat for the Purchase Day Book and Petty Cash Book and show the Totals in the respective ‘Boxes’ on the Return.
You may occasionally claim VAT back from H.M.R.C. where you have had a ‘poor’ month or so on Sales or for other reasons.
If you ever have a ‘Phone call from your VAT Inspector asking to come and see your books – DON’T panic, it’s his job and he is only making sure that you are recording VAT correctly – if you aren’t don’t worry, he will simply put you right and – unless you are deliberately ‘fiddling the books’ – they are nice people and can be very helpful.
August 4, 2009 in Basic Skills
We now come to the Cash Book. This is where you record the Receipts of monies due to your Company (or Employer) from your Clients and the Payments of monies due to your Suppliers. If you are ‘controlling’ the Cash Book then you should receive all cheques, and perhaps cash, which are monies due to your Company (or Employer) and these are entered on the LEFT hand side ‘The Receipts’ of the Cash Book, on the day and date you receive them, showing the amount in the ‘Total’ column and extending to the respective ‘Analysis’ column, or ‘Sundries’ noting the Nominal Account Code.
Having entered the receipts in to the Cash Book you then need to complete the necessary ‘Paying-In’ slip for the Bank listing on the reverse the name of
each of the payers and the amounts they have paid and the total of these is then transferred to the front of the slip in ‘Total Cheques’ with any cash being shown in the boxes above then totalled and, adding on the cheques a final Total at the bottom. This is then taken to the Bank, either by yourself or a messenger, and paid in over the counter.
The next course of action regarding the Cash Book is to ‘Post’ any items which appear in the ‘Sales Ledger’ column to your Clients accounts in the Sales Ledger, ‘Closing off’ each account where there is no Balance left after the entry is posted, this is simply done with a RED line across the monetary columns only. You may also occasionally have an instance of money being refunded to you by a supplier and your course of action is to post from either
the ‘Purchase Ledger’ column, if you have one, or from whichever column it has been extended to, in to your Suppliers account indicating which Invoice or Invoices this refund refers to.
When it comes to paying your Bills you may have certain times in a month when you settle certain Suppliers settling with other Suppliers at a different date, in one office I worked in I had four Fridays on which I made payments to all my Suppliers – rather than settle all in one day. You might well experience the same thing.
When you are ready to begin paying your Suppliers you will first need to balance their account in your ‘Purchase Ledger’ and prepare remittance advices, with a copy for yourself, showing the ‘Outstanding Invoices’, you either prepare this yourself or, hopefully, have a secretary/typist who can do it for you – if you have one, CHECK her work and make sure it is correct because when you have drawn the Cheque for the correct amount and wait for it to be signed, you will feel a fool if your Director finds a mistake. I promise you – THEY DO. So, having got all the Cheques signed and attached to the Remittances all you do now is put them in the post. Now you have to ‘write up’ the ‘Payments’ (Right Hand) side of the Cash Book with Cheque amount in the ‘Total’ and the extension in to the ‘Purchase Ledger’ column and then ‘Post’ to the Purchase Ledger ‘closing off’ accounts where possible. Do not forget to ‘Cast and cross cast’ your Cash Book page by page, it will help you in the long run. You may also be required to write Cheques for other items which are not in the ‘Purchase Ledger’ but will still be entered in to the Cash Book and extended to a Nominal Ledger ‘Column’, the method of dealing with these comes later.
You then attach your copies of the Remittances to the Invoices you have paid and transfer them to a ‘Paid’ file.
You will, each month, have to reconcile your Cash Book with the Bank Statements which will have been received by you or the Chief Cashier. There are two ways of doing this, you either reconcile Cash Book to
Bank Statements or Vice Versa. The first thing to do is to ‘Tick’ every entry on the Bank Statement against the same entry in your Cash Book, at the end of this you will have un-ticked items in your Cash Book and un-ticked items on your Bank Statement. If you have any Standing Orders and or Direct Debits on your Statement but not in your Cash Book you must enter these straight away which will eliminate one set of figures. The next step is the Reconciliation itself, an example is given below:-
| Bank Reconciliation as at …………. | ||
| Balance per Bank Statement | £ 500.00 | |
| Add: Payments not entered:- | ||
| Joe Bloggs | £ 40.00 | |
| H. Steptoe | £ 57.50 | |
| £ 97.50 | ||
| £ 597.50 | ||
| Less: Cheques not presented:- | ||
| R. Waters | £ 23.75 | |
| S. Houlder | £ 6.49 | |
| £ 30.24 | ||
| Balance as per Cash Book | £ 567.26 | |
It would be wise to keep these Reconciliations on a file for reference should there ever be a query.
We now come to the Petty Cash Book. This is for minor expense such Tea, Coffee and other sundry items which occur on a daily basis. The way this works is that the person responsible for looking after Petty Cash is ‘given’ a ‘Float’ of, let’s say, £1,000.00. This amount is kept in a Petty Cash Tin, in various denominations of Notes and Coin and always kept in the safe unless being used, NEVER leave it on your desk whilst you are not around. At the end of a period, say a month, you will need to ‘re-imburse’ the ‘Float’, this is done by simply adding up all the Petty Cash Vouchers for expense to arrive at Total A, then similarly you add up any I.O.U.’s for Total B, next you take the cash and add up each denomination of Coin and Notes to arrive at Total C and completing a Reconciliation form similar to that shown below which is based on a form I drew up for my own purposes. In my case the ‘Float’ was for £1,000.00.
| Petty Cash Reconciliation as at | ||
| Total of ‘Float’ | £ 1,000.00 | |
| Deduct – Petty Cash Vouchers | £ 420.00 | |
| I.O.U.’S | £ 50.00 | |
| £ 470.00 | ||
| £ 530.00 | ||
| Deduct – Coins | £ 26.17 | |
| Notes | £ 221.00 | |
| £ 247.17 | ||
| Cheque to replenish ‘Float’ | £ 282.83 |
As you will see the amount of the Cheque to replenish is the nett amount after deducting the Vouchers, I.O.U’s, Notes and Coin.
In this Reconciliation I have ‘cheated’ slightly, whilst you do not need to list the ‘Vouchers’ as they will be attached to the Reconciliation, the I.O.U.’s will remain with the Petty Cash until settled by the borrower. You will need to list the denominations of Coin and Notes with the amount of each shown beside it. The cheque is made payable to ‘Cash’ with ‘Please Pay Cash’ written in the crossing on the cheque which is initialled by the Signatory to the cheque. It is wise to take the reconciliation with you when you want the Cheque signed as it may well be asked for. Again, it is wise to keep these Reconciliations on file as well.
One thing to remember with regards to the Petty Cash ‘Float’ is that you will be held responsible for any losses irrespective of how much the ‘Float’ is.
August 4, 2009 in Basic Skills
To start with the ‘Purchases’, all Invoices which you receive from Suppliers should, where possible, be entered in date order into the ‘Purchase Day Book’ showing Date, Supplier, Invoice number followed by the Amount, V.A.T. and the Net amount extended in to a column headed for that type of expense, or into a ‘Sundries’ column with a Nominal Account code applied against the entry, the Nominal Account code is actually the Account in the Nominal Ledger to which this item will be posted. I should mention before we go too far into this narrative that some companies in setting up their Accounts Department make it a rule that ALL Suppliers Invoices must be checked by the department responsible for the ordering of whatever the invoice relates to – it is purely a method of verification, though they should keep the Accounts Department informed of what is happening.
This done, your next step is to enter these items into a ‘Purchase Ledger’ in which you should have individual accounts for each Supplier where you then ‘post’ each Invoice to the credit (right-hand) side of their account, showing in the ‘Purchase Day Book’ the account reference for each Supplier as you ‘post’ to the ‘Purchase Ledger’ cross referencing with the page number of the ‘Purchase Day Book’ shown against the amount ‘posted’.
It is of help to yourself if you get into the habit of ‘Casting and cross casting’ weekly, that is adding up the columns and then their totals across to check the Main total.
It is also to your benefit to keep any and all filing up to date. Remember, all documents which substantiate your accounts have to be kept, by Law, for Seven Years.
The next book of entry is your ‘Sales Day Book’, this is entered in similar fashion showing the Date, Customer, Invoice Number, the Total, V.A.T and then the Net amount extended into the appropriate column for that source of income.
And then, as with the purchases, you ‘post’ each item into the respective Customer’s individual accounts in the ‘Sales Ledger’ showing the Invoice amount on the debit (left-hand) side noting the account reference against the entry in the ‘Sales Day Book’ and the page number of the ‘Sales Day Book’ against the item ‘posted’.
Credit Notes can be entered, IN RED, into the respective ‘Day Book’ and ‘posted’ along with the Invoices remembering to deduct the Credits as you go and posting them on the opposite side of the account in question in the ‘Purchase Ledger’. This said, your employer may have installed a book simply for Credits against Purchases and a separate one for Credits on Sales.
Again it would be to your benefit to cast and cross cast on a weekly basis.
If you are a member of an Accounts Department it may well be that you would look after either one or both of the ‘Day Books’ just referred to.
If this is the case then you must be prepared to deal with all and any queries that arise from your work with the other Departments within your company.
However, I shall continue as the subject is far from complete.
August 4, 2009 in Basic Skills
Book-keeping, the trade I learned at the tender age of 18 when I joined a London firm of Chartered Accountants who were prepared to train me as an Audit Clerk. In the three or four years I was with them I learned a lot about keeping records and working with detail and accuracy, something which has stood me in good stead over the intervening years. Also I should add that there was not, as now, any computer involvement – they did not exist. After the four years with the Accountants I went into the commercial side which, in the main, I enjoyed.
The idea of this article is to give any would-be book-keeper an insight as to what can be expected of them, though firstly they should decide if they wish to take ‘Articles’ with a firm of Chartered Accountants or go straight into the commercial side as a member of an Accounts Department. If you wish to take ‘Articles’ then the suggestion I would make would be for you to approach a Local firm of Accountants to see if they can take you on or perhaps offer you further advice on how to pursue this course. If, on the other hand, you decide to go into the commercial side then it would be an idea to find a college who can provide a course on Book-keeping either as an ‘Evening Course’ or, if you are fortunate enough, a ‘Day Course’, and – it is in this respect that I shall try and give you an idea of what you can look forward to.
Briefly put, book-keeping is the recording of Income and Expense incurred in the day to day running of any business, irrespective of size, with the intention of showing whether or not that business is making a profit or loss, and also to provide accounts for H.M. Inspector of Taxes.
Before I begin, the one thing to remember here is that Suppliers Invoices which include V.A.T. must bear the Suppliers V.A.T. Registration Number, and similarly with Sales Invoices to your Clients, if your Company is registered then your Company’s V.A.T. Registration Number must be shown on your Invoices.
The assumption in this article is that the reader will be using ‘Manual Accounts’ and not a Computer, in which case the best place to begin is with the books which would be required, these are:-
1) A ‘Purchase Day Book’
2) A ‘Sales Day Book’
3) A ‘Cash Book’
4) A’ Petty Cash Book’
These are referred to as the ‘Books of Prime Entry’ and, therefore, you would also need:
5) A ‘Purchase Ledger’
6) A ‘Sales Ledger’
7) A ‘Nominal Ledger’
It is from your Nominal Ledger that your ‘Final Accounts’ are made up.
In following posts I shall attempt to give, in brief and concise detail, your methods of entry and how you should follow through an action.