TYPE OF RECORDS TO BE KEPT
Basically you need to keep records for all business transactions which are used to prepare financial statements. The common records that you will need to keep in respect of business income include:
- Full set of books of accounts recording all your business transactions, receipts and payments.
- Invoices, vouchers, receipts and such other documents, necessary to verify the entries in the books of account.
The following are descriptions of necessary records to be kept:
- Goods sold at an arm’s length transaction
- Goods taken from stock for personal use or family’s consumption
- Goods or services supplied to others in exchange for their goods or services
Accurate records must be kept for all cash receipts. For such cases, a record of the following transactions should be kept:
- Cash sales
- Cash paid on account by customers
All bank statements or savings books, into which account money for the business has been credited or withdrawn, should be retained.
Separate accounts for business and personal use should be maintained. If, for any reason, a separate account is not maintained for the business, a record should be kept to identify the transactions which are for business purposes.
At the end of the accounting period, a physical stock-take should be made to ascertain the quantity and cost of stock on hand which may include raw materials; work-in-progress; and finished goods
List of debtors and creditors
In maintaining a list of creditors and debtors, you should keep separate records for trade, non-trade debtors and creditors, i.e. persons owing money to the individual or to whom the individual owes money which are not related to the business should be maintained.
List of assets and liabilities
There are instances where assets and liabilities may be used for both business and personal purposes such as:
- Motor Vehicle
A record of business and private mileage should be kept. This will be the basis used to allocate the expenses incurred on the vehicle between the two purposes.
A part of the residence may be used for business purposes. If the expenses incurred on the premises can be easily identified as relating to private living quarters, then such records should be maintained. However certain expenses may not be identifiable as relating to private use only e.g. (electricity and water ). In such situations, a fair estimation of private use should be noted when the expenses are recorded.
Details of private or non business use of the overdraft/loan, including purchase of shares or non business property and drawings for personal use should be maintained.
Private money used in business
A record should be kept of any money that was invested into the Business. Evidence of such money should be retained (e.g. Legacy or lottery winnings etc.)
In the case of a partnership, money brought into or taken out of the business, the partners’ share of profits, interest on capital, salaries and other business should be recorded.
Personal expenses paid for by the business (e.g. educational fees for children, holiday expenses for family) should also be recorded separately.
Contract and subcontract payments
Details of contractors or subcontractors such as name address, identity card number, amount and date of payment and the nature of work done are required to support the payments made.
Profit and Loss Statement and Balance Sheet
Any other document that confirms entries in your accounts (such as worksheets)