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This post directly relates to the bank reconciliation of the accounts. It does not matter how big or small is your company, matching your accounts to the bank records is a MUST and should be performed weekly or at least monthly. WHY do it The main reason is to ensure that your records are up to 

 In this unit, we will discuss the depreciation of the fixed assets. Let's look at the real example, we bought a laptop and we can approximately estimate its useful life for five years, after which technology develops and we need more features in other words the value of this item is no longer the same as purchased years ago.  In accounting such diminishing of value called "depreciation" charge and every year we deduct an amount we agree in our business.  Question is does this apply to all assets, even intangibles? Yes, the depreciation for tangible and amortization for intangible assets is applied.  How much is this "depreciation charge"? There are two main stream methods of depreciation, accountants use: straight line and reduced balance. Straight line is simple division of  value by number of years we expect the asset to be valuable, or number of useful life years. If the same laptop costed us 1000 pounds, then we deduct 200 each year and in the end of the ye

Purchase order is an initial step towards the purchase invoice. In many small businesses or start up, this step is often skipped, as it is easier to make a purchase directly from a supplier or warehouse. However, once a business grows and demands are increasing, the stock can be replaced with a better purchase ordering system. For example, it can be linked to the diminishing stock of product and automatically added to the purchase order. So having a purchase order system can benefit in streamlined ordering process, but also tracking of the items and budgeting for our cash flow.   The content of a purchase order is similar to the purchase invoice, so it is easier to copy the information into actual invoice once it is approved. What should we include in purchase order? Supplier’s business information Date of order Date of supply/delivery Our Purchase order (PO) reference that is later quoted on the invoice from supplier Items required Unites and prices Total pri

Credit note is a document that credits (specified and agreed amount) towards sale made. For example, we are selling furniture and customer wrote to us, that furniture arrived damaged, but they still like to keep it. We raise a credit note for the damaged part, say we agreed to reimburse 10 pounds or dollars. There are a few ways to go about refunding the credit note amount: First one – is to make a cash payment to the customer’s account. Second one- is apply the credit note directly to the sales invoice, if that purchase was on credit, therefore reducing the amount due to be paid. Lastly, we may offer a credit amount towards a next invoice, if invoice was already paid and by this we will also reduce amount to be paid by the customer. Credit note should mention: Credit note number Date of credit note Sales invoice this credit note is referred to Amount credited back Reason for the credit note Description of items credit, units, price per unit Total amount of

 Legal Entities In this blog, we look into the main legal entities, that can be formed in the UK, differences, and advantages, which is important to look into before either opening own business or joining a company as an independent bookkeeper.  The most common is a limited company. The process of registering is through the Companies House register and advisable to register at the same time for the Corporation tax with the HMRC tax office. The whole process will not take more than 15 minutes and 12 pounds. The preparation includes: choosing the name, business address (which can be different from the business director's address), select the secretary and directors team, think about shareholders (or who will pay to set up initial equity, minimum a pound).  The obvious advantage of running the limited company as the name suggests is separate from the personal liability and own finances. Therefore, should the company be liquidated, it will not affect your situation, nor would you be re

In the previous, we have mentioned, that we need to add the Customer name, address, and contact details on our invoices to them, but we also briefly said we need to add also information about our business. Generally, we make a template, we reuse, for all sales invoices we send to our clients for goods and services. It does not need to be fancy, but we need to ensure we display the required information. So here are the compulsory details to mention about our business: Business name Before we begin trading, we choose our business legal name and if we are registered as a limited company (read about it in the next post), we officially register this in the Companies House (aka Registrar). We may also have a trading name, which we use instead of or together, ie Smiths and Sons ltd t/a (trading as) Flowers Family ltd. Business registration number If we are a limited company, we would need to add our business registration number as provided by the Companies House. Business address This would b