Financial accounts
Every UK business is required to complete accounts on an annual basis. These accounts are then used to calculate the amount of tax payable, based on profits and other forms of income.
These accounts are also important from an individuals perspective. Not only do they provide you with information about the profitability and stability of your business, they can also help when requesting finance, both personally and for the business.
To prepare accounts, it is important that you have adequate records detailing the transactions your business makes. These include invoices, statements, books of prime entry and so forth. Without these records, this becomes extremely difficult, and failure to keep adequate records can result in fines being imposed.
HM Revenue & Customs (HMRC) and other government bodies have certain powers to ensure that tax and VAT is collected correctly. Without these records to review, these organisations can raise 'assessments'. When you are assessed for profits, or for VAT liabilities, it is up to you to prove these assessments wrong. Without records, this is virtually impossible.
There is a need to keep records for lengthy periods, usually in excess of six years. This is because HMRC can request information to prove your accounting calculations are correct.
What Should I Keep?
Put simply, you should keep everything. Any records that you produce (i.e. Cash books, Day Books etc.) should have paperwork that backs up the information contained therein. Examples include Invoices, Delivery Notes, Bank Statements, Diaries and so on. Because of the variation of business styles, it is difficult to create a full list, and as such you should contact your accountant for further information.
It is equally important that any records produced are accurate and complete. Providing incomplete records (where certain information is missing) can be problematic when completing accurate accounts, or when dealing with HMRC enquiries.
It is in your business's best interest to keep your records accurate and timely. Doing so improves your business's chances of success, as you will be able to monitor your business more closely, and make adjustments and decisions where and when required.
For more information, or if you require help and advice on any accounting or bookkeeping matter, please contact your local office.