Accaboeka Accounting Services
All about bookkeeping
Why should you keep accurate records of all your transactions?
For the small business owner, this is especially ardious. You know what is going on in your business, whether you are making a profit or a loss, and how much money you have left. So why all the administrative duties?
There are several very good reasons you have to keep accurate records. These include:
- Cash flow problems is the number one cause of small companies going under. You think you have enough money to reach the end of the month, but you forget about some of the bills that need to be paid, taxes that still need to be paid or unexpected expenses. Recordkeeping can help you see what you actual cash flow situation is, as you will have an accurate picture of your debtors and creditors.
- All supporting documents and financial records should be kept for 5 years as required by the companies act. The records of transactions and supporting schedules have to be kept for 15 years. All of these documents should be readily available for inspection - this means that should an unexpected audit be conducted of your business dealings, you should be able to provide the supporting documents immediately. All supporting documents should be originals, not faxes or copies. Hand-in-hand to this, you should be able to provide a general ledger that shows all the transactions you have entered into. This usually services as the basis from which audits are conducted.
- You need accurate records to enable you to submit accurate returns to the Receiver of Revenue, and pay the correct amount of tax. If you use an accountant to calculate the tax you owe, your accountant will need these records to determine your liability. You will also need the information for the Annual Return required by SARS.
- You have to set up annual financial statements. These financial statements are required by banks if you need financing, by suppliers in order to give credit, by SARS, as well as the department of Trade and Industry.
Records that should be kept include:
- records showing the assets, liabilities, undrawn profits, revaluation of fixed assets and various loans;
- a register of fixed assets;
- detailed daily records of cash receipts and payments reflecting the nature of the transactions and the names of the parties to the transactions (except for cash sales);
- detailed records of credit purchases (goods and services) and sales reflecting the nature of the transactions and the names of the parties to the transactions;
- statements of annual stocktaking; and
- supporting vouchers.
What will accurate record keeping show?
- Identify nature of receipt
- The records will show whether the receipts are of a revenue nature or capital nature.
- Prevent omission of deductible expenses
- Expenses may be overlooked or forgotten when you prepare your tax return, unless you record them at the time they are incurred or paid.
- Establish amounts paid out as salaries or wages
- Under normal circumstances amounts paid to employees for services rendered are taxable in the hands of the employees. In these cases employees’ tax must be deducted from salaries or wages by the person paying such salaries or wages.
- Explain items reported on your income tax return
- If your income tax return is examined by SARS, you may be asked to explain the items reported. Adequate and complete records are always supported by sales slips, invoices, receipts, bank deposit slips, cancelled cheques and other documents.
You may choose a system of record keeping that is suited to the purpose and nature of your business. These records must clearly refl ect your income and expenditure. This means that, in addition to your permanent books of account or records, you must maintain all other information that may be required to support the entries in your records and tax returns.
Paid accounts, cancelled cheques and other source documents that support entries in your records should be filed in an orderly manner and stored in a safe place. For most small businesses, the business chequebook is the prime source for entries in the business records. It is advisable to open a separate bank account for your business so that you do not mix your private and business expenses.
Accaboeka can capture all your transactions for you on a monthly, bi-monthly or annual basis, set up your financial statements for you, submit your VAT returns, calculate your annual companies tax and complete the provisional and final tax returns.
All you need to do is to provide your bank statements and all supporting documentation for me to work from.
You can also do your own record keeping with an accounting package like Quickbooks or Pastel, and I can then do your year-end journals for you and set up and sign your financial statements.
If you have a CC (Close Corporation), you only need your annual financials to be signed, but as a Pty Ltd, you have to have you financial statements audited as well. There is usually a requirement that the person who does your record keeping is not allowed to audit it as well.
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