Good financial records are a key to business success. By keeping
accurate records, small business operators can make better business
decisions and will find it easier to raise funds and sell their business
should they wish to do so.
In 1941, the American Institute of Certified Public Accountants used as a definition of “accounting” the following:
“The art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.”
This definition has been found to fall well short of the actual discipline of accounting as we know it today but it does highlight the fact that accounting encompasses the recording of financial transactions by the entity. This role is now often called “bookkeeping.”
The bookkeeping role requires the recording of financial transactions of an entity to be suitably maintained. Financial transactions are all those that involve money or money’s worth, and occur between the entity and some outside party.
Small business operators are often confused about the type of records they should keep to monitor their finances. The type of records that should be kept includes:
• Sales records
• Deposit books
• Debtors records
• Order books
• Creditors records
• Cash payments book
• Cash receipts books
• Bank reconciliation statement
• Cheque butts
• Payment records (Tax Invoices & Statements)
• Production
• Stock & work in progress records
• Work in Progress
• Payroll and other employment records
• Petty cash records
• Inland Revenue documents
• ACC Records
• Insurance records
• Fixed Asset register
• Prescribed Payments Systems Records
Whilst this list may appear to create a large amount of work, many of the records are interrelated and do not require copious amounts of time to maintain. To find out more check out our Accounts & Bookkeeping ebook
