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Free basic record keeping advice in South Africa

Updated on October 29, 2013

Record keeping

Compliance with legal reporting standards is important. Your accountant should guide you in this respect.
Compliance with legal reporting standards is important. Your accountant should guide you in this respect. | Source

Record keeping basics

What is financial record keeping?
Record keeping is a method of recording the cash that leaves and comes into your business. Cash is the lifeblood of a business, controlling it ensures the survival of your business.

Why keep records?
It is important to keep neat and accurate records:

• To make informed decisions and to comply with legal business and tax requirements.
• Records show you how your business is performing.
• Records are a memory bank of all monies going out or coming into your business.
• Records are a reflection of your business' performance to outside stakeholders.
• Records help you in planning the future of your business.

What records should you keep?
• Financial records,
• Legal business records,
• Employment records,
• Property records,
• Correspondence records and
• Safety records.

How to keep financial records?



TRANSACTION > VOUCHER > JOURNAL > LEDGER > FILE > STORE

Before we start delving into recordkeeping methods, lets look at a few terms:

Transaction - a transaction is any exchange of money for something of value.
Source document - a source document is a record of proof of a transaction.
Voucher - source documents like receipts, invoices, deposit slips, cheques, etc., are called vouchers.
Account - an account is a column/document setting out all the transactions relating to a particular item and includes a balance showing the difference between inflows and outflows.
Journal - a journal is a book where you record all transactions that take place in your business each day. There are two types of journals, a cash receipts journal (CRJ) and a cash payments journal (CPJ).
Ledger - a ledger is a book where you transfer all journal entries at the end of each month. We will not go into it further in this present discussion. It is used by the accountant to draw up your financial statements.
File - a voucher file is for storing all your vouchers in the numerical order they appear on your journal.

I. Vouchers.

Make sure you get proof for all transactions, in the form of a voucher. If you cannot, make sure to record it yourself, noting the date, who was involved, what it was about and how much money changed hands.
You need to number each voucher in numerical order, for ease of recording and filing.

Source

II. Journal.

Make sure to record all your transactions at the end of each day. So when you close for the day, you must take out all you vouchers for the day. Count all the cash in your till or cash box. And record all of these in your journal. If you deposited cash into your bank, use the deposit slip as your source document.

Each transaction is recorded twice in the journal. This is called the double entry principle. The first entry should be into a money control account. The second entry shows how the transaction relates to your business perfomance. An example is a receipt which is recorded in the cash-in column, then in the sales column of your journal. Thus a transaction always affects two accounts.

Always start on a blank sheet of your journal each month. You need to first record the balances carried from the last day of the previous month. Your cash balance from the cash box, your bank balance from your bank statement, your debtors' and creditors' balances, etc.

Decide whether it is a CRJ or CPJ transaction and use the appropriate journal. Record each voucher entry on a separate line in your journal. The journal has columns on each page, you must name them for accounts relevant to your business. Remember to enter each transaction twice.

Fill in the date of the transaction. Then the details of what was involved in the transaction. And then record the transaction amount in the two relevant account columns. Make sure it is done neatly and accurately.

Add up the entries for the day and subtract the balance carried from the previous day, to get your daily sales figure. This is the amount you will carry forward to the next day. This is especially useful for cash as this amount should be the same as the cash you counted from your till or cash box. If it is not the same, you must check your calculations or find out what happened to the money. If the page gets full before the end of the month, you should add up the entries for each account and carry them forward to the next page.

If you have customers who buy on credit, you should record their transactions under debtors. It is also advisable to keep accounts of each in a Debtors' journal. That way you can easily access their purchases and payments. In the same way,
if you buy materials on credit from your suppliers, you should keep a Creditors' journal. This will help you keep track of your accounts with your suppliers.
You may also have to keep a Wage Register, to record wages paid to your labourers.

Make sure to collect your bank statement at the end of the month. You will then be able to record the bank charges for the month, as well as get the balance in your account. You will also be able to see if your credit customers have made payments on their accounts and record and adjust accordingly. This should be the same amount reflected in your journal, if not you must find out the reason.

From these records your accountant can draw up your income statement. This will show you the health status of your business. Whether it is making profits, growing or stagnating. You can also be able to see where the problems are and take timely action to fix them to get your business back on track and deliver according to your business plan.

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Electronic records.

With access to technology nowadays, the possibility for electronic filing exists. If you have access to a computer, there are various reliable and easy to use software packages for accounts. This makes it much safer and easier to keep accurate records and assess your business. It also saves the environment as you do not use paper. Thus it keeps up with the trend to go green in business. You do need to make sure that your records are backed up and stored at a separate location. In case of a system crash or fire. This could be in CDs, external RAM or memory sticks. Nowadays there are dedicated servers and cloud servers, so the possibilities are endless. Just make sure to back up regularly to minimise the amount of loss.

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