Understanding bookkeeping isn’t difficult, but it is essential for your business. Here’s what you need to know to learn basic bookkeeping for beginners.

In short, you’ll need to keep details of all your income and expenditure along with invoices and receipts of each one. However, the amount of detail you need will depend on whether you’re a sole trader or a limited company.

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Basic bookkeeping for sole traders:
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As far as keeping accounting records go, sole traders have it far easier than any type of company. In essence, all you need to do as a sole trader is keep records of all of your income and all of your expenses.

When it comes to doing your tax return, you can just add these up and enter the figures in the appropriate place on the form.

This means using a simple profit and loss account and retaining copies of all invoices and receipts (so you can show the tax man should you ever get asked to prove your tax returns are accurate).

It’s a good idea to set up a filing system and number your invoices and receipts so that you can easily track and record them. Your profit and loss account can be a simple spreadsheet detailing income and expenditure.

It’s also a good idea to break down income and expenditure into categories such as advertising costs, banking fees, etc. This will then help you better manage your business and cashflow.

As sole traders do not need to file any accounts, this is all you really need to do in terms of basic bookkeeping and a lot of it is just to make your life easier in the long-run.

Basic bookkeeping for limited companies:
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Limited companies will need to deal with a more complex set of circumstances such as dividends and PAYE as well as file annual accounts with Companies House.

It is also a legal requirement that you stay on top of your company’s accounting records and keep historical records for at least 6 years.

The main things you will need to maintain a basic set of accounts are:

- Sales Ledger – detailing all income and amounts still owed
- Purchase Ledger – detailing all expenditure
- Wages Book – Showing all salary payments and National Insurance contributions

From these you will be able to prepare your annual accounts which is a legal requirement for all limited companies.

Because of the complex nature of preparing accounts, you would generally be advised to use an accountant or bookkeeper to prepare your accounts. Not only will this ensure that all records are accurate but it can also help to save you money in the way of tax efficiency.

Keep in mind that even if you do outsource the preparation of your accounts to an accountant or bookkeeper, you will still need to do some basic bookkeeping yourself.

As with a sole trader, you will need to keep and file away all invoices and receipts and keep a basic profit and loss account in order to track all of the incoming and outgoings of your business.

Using accounting software for bookkeeping
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Accountancy software packages save time, money, and effort by helping you record all your transactions.

The best accountancy software will automatically calculate your profits, asset depreciation, PAYE, national insurance, corporation tax, VAT, self-assessment income tax, and many other financial requirements. All you need is to be diligent about entering the right amounts.

Accounting software covers most basic accounting requirements, including:

- Keeping track of income and expenditure
- Preparing your records for taxation
- Calculating depreciation of assets
- Calculating inventory
- Taking care of salaries payment and payroll
- Filing bank reconciliation details

Resources
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Recommended Accounting Software: [ Ссылка ]
Recommended Accountants: [ Ссылка ]
Average Accountancy Costs: [ Ссылка ]
Questions To Ask When Hiring An Accountant: [ Ссылка ]


DISCLAIMER: The information contained in this video is for general information purposes only. Any reliance you place on such information is therefore strictly at your own risk. Always consult with a qualified accountant to get professional advice tailored to your individual situation.

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