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Straightforward Publishing - Colin Richards

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83 pages

English

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Description

Business Accounting can be complex. Whilst most people have a basic idea of accounting and maintaining books, not everyone knows how to use accounts fully to manage a business. This book deals comprehensively with the overall basics of accounts and preparation of books and accounts. It also deals with the more sophisticated process of analysing accounts to manage a business effectively and also how to use accounts to value a business.

Sujets

Gestion et management

Informations

Publié par	Straightforward Publishing
Date de parution	25 mars 2020
Nombre de lectures	3
EAN13	9781913342937
Langue	English

Informations légales : prix de location à la page 0,0300€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

Extrait

A STRAIGHTFORWARD GUIDE TO BUSINESS ACCOUNTING
Revised Edition
COLIN RICHARDS
Editor: Roger Sproston
Straightforward Publishing www.straightforwardco.co.uk
Straightforward Guides
Straightforward Co Ltd 2020
All rights reserved. No part of this publication may be reproduced in a retrieval system or transmitted by any means, electronic or mechanical, photocopying or otherwise, without the prior permission of the copyright holders.
ISBN: 978-1-913342-02-9 ePUB ISBN: 978-1-913342-93-7 Kindle ISBN: 978-1-913342-86-9
Printed by 4edge www.4edge.co.uk
Cover design by BW Studio Derby
Whilst every effort has been made to ensure that the information contained within this book is correct at the time of going to press, the author and publisher can take no responsibility for the errors or omissions contained within.
CONTENTS
Introduction
Chapter 1. Fundamentals of Accounting
A definition of accounting
Accounting cycles
Types of business entities
Sole Trader
A Partnership
A Limited company
A Limited Liability Partnership
The role of accountants
Financial Accounting
Management Accounting
Governmental Accounting,
Tax Accounting
Forensic Accounting
Project Accounting
Social Accounting
Basic accounting terms
Chapter 2. Main Principles of Bookkeeping
Principles of bookkeeping
Business activities of a company
What information must be kept?
The advantages of a bookkeeping system for your business
How to record the information you need
Proprietary systems.
The Cash Book System (Single Entry).
Examples
Example Invoice
VAT
The Double Entry System
Computerised Accounting Systems
Summary of main points
Chapter 3. The Double Entry System
The Double Entry System
The origins of the double entry system
In the ledger
Which side should your entry be on
The Personal Ledger
The Nominal Ledger
Assets
Liabilities
Capital
Accounting for purchases and sales
Accounting for expenses
Accounting for drawings
Debtors
Bad and doubtful debts
Depreciation of assets
Summary of main points
Chapter 4. The Final Accounts
The Trial Balance
The profit and loss account (Income statement)
The balance sheet
Assets
Fixed Assets.
Current Assets.
Liabilities
Current Liabilities
Long term Liabilities.
Capital (equity)
Summary of main points
Chapter 5. Accounting for VAT
The VAT system
A Business
Supply of Goods
Supply of Services
Taxable Supply
Discounts on Taxable Supplies
Time of Supply
Registration
Compulsory
Voluntary
Tax Invoices
Inputs to the Business
Outputs of the Business
Tax collection
Bad debt relief
Accounting for VAT in your books
Chapter 6. Accounting for Limited Companies
The limited liability company
Limited companies-owners of the company and managers
Financial statements
Limited company capital
Loan capital
Characteristics of limited company accounts
Accounting for share capital
Registered and issued share capital
Share issues
Premiums on shares
The final accounts of a limited company
The published section of the profit and loss account
Balance sheet disclosures
Summary of main points
Chapter 7. How the Tax System Operates in the UK and Tax Deadlines
How the tax system works
HMRC
Assessment of taxes-Self Assessment
If you ve been told to send a return
Claiming tax relief
Registering for Self-Assessment
Companies
Keeping records
Inaccurate or late returns
HMRC compliance checks
The Range of Taxes a Business is Liable For
Calculation of income tax for sole traders
Companies and Corporation Tax
The payment of Dividends by a Limited Company
Capital gains tax
Capital Gains Tax allowances
National Insurance
National Insurance classes
Payment of National Insurance
PART 2: MANAGEMENT AND CONTROL
Chapter 8. Management Accounting
Budgets
Formulating budgets
Cash flow considerations
Budgeting and costs
Costs involved in business
Fixed and variable costs
Semi-variable costs
Selling expenses
Budgeting sales income
Who should carry out the sales forecasting
Creating the budget
Arriving at price-price budgeting
Costs of production
Break-even analysis
Calculating the break even point
Internal budgeting-budgeting for expected overheads and capital items
Budgeting for overheads
Rent and rates
Salaries
Stationary
Telephone
Travelling
Insurance
Bank charges
Entertaining
Depreciation
Accountancy and audit fees
Budgeting for capital items
Example of an administration budget
Chapter 9 Monitoring Budgets and Cash flows
Monitoring budgets
Use of financial ratios for monitoring budgets and C/Flow
Profit ratios
The gross profit margin
The net profit margin
The return on capital ratio
Efficiency ratios
The debtor s turnover ratio
The debtor s collection period
The creditors turnover ratio
Creditors payment period
The stock turnover ratio
The average stock holding period
Liquidity ratios
The current ratio
Checking the quick ratio
The security interval
Solvency ratios
Checking gearing
Glossary of terms
Useful addresses and websites
Index
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Introduction
Many times, I have met people who have the same common complaint, I dread the time when it is necessary to prepare accounts for my business. In truth, I don t understand the figures that my accountant provides and I don t understand why I have to pay tax when, according to me, I have made a loss
This pretty much sums up both the general level of knowledge of most people when it comes to accounting, and the general principles of accounting. The annual preparation of accounts is very much like the annual visit to the dentist-both can hit you in the pocket.
It is true to say that most people who run businesses would rather get on with the process and leave the accounting to others. However, a knowledge of accounting, even a basic knowledge can help and assist with the daily running of a business. A knowledge of accounting will also help you to converse with your accountant and to understand how you can change things to make your business more profitable. Quite often accountants will accept what you give them and use the information on which to base their final figures, whereas with a working knowledge of accounting you can help shape your own business so it is more profitable.
Reading this book won t turn you into a fully qualified accountant That is a rather more drawn-out process. It should however, turn you into a better manager. The main purpose of accounting, as we will see, is to:
Provide a system that will record income and expenditure relating to the day-to-day activities of your particular business. This regular recording of data is absolutely necessary for the annual completion of accounts and tax returns and also helps potential funders and future business partners assess the business.
Accounting provides a tool for analysing your business and assessing overall performance. With a little knowledge you can make more informed decisions about your business and how to improve performance.
In this book, from the start we cover the very basics of accounting and bookkeeping and also the preparation of key financial statements. We also cover taxation and VAT. Each area is illustrated.
Finally, we then cover management accounting, which is about the provision of information to make decisions. This section is more suited to larger businesses, typically limited companies although the information will still be useful for anyone engaged in business.
I will outline how to use ratio analysis techniques to spot trends and key figures in business, which is more about management accounting. Overall, you should find this book informative and rewarding and use the information gleaned to help you better manage your business or to develop your knowledge for future management.
It is important to note that this book does not cover Public Liability companies (PLC s) as this is a totally different and somewhat more complex area of accounting. The information contained within is appropriate to sole traders, partners and limited companies.
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Chapter 1
Fundamentals of Accounting

In chapter 1 we will look at the following:
- A Definition of accounting and different areas of accounting.
- Different business entities
- Basic accounting terms
This will serve as a backdrop to the following chapters, which go into detail about the practice of bookkeeping and production of accounts.
A definition of accounting
Technically speaking, Bookkeeping means the ongoing recording of business transactions in Books of Account. Accounting means taking financial information from the books of account and using it to explain and understand the financial position of the business.
Accounts are a summary of a businesses financial activities for a period of time, commonly 12 months. Accounts can also be referred to as financial statements. A business will need accounts to see how the business is doing, to raise money for the business (bank managers will always want to see accounts), to raise money for the owners, i.e. for loans and mortgages, for insurance claims, for making tax returns, for partners in a partnership to see what is their share, for businesses which are a company for filing with Companies House and, finally, when it comes to sell the business then the purchaser will want to see past and current accounts. Accounting information you have prepared will show:
Whether the business is making a profit or a loss
What is the value of a business
What is the cash situation
Who owes what to a business
Overall, how the business is performing
Therefore, the main purpose of accounting is the clear provision of information to those who wish to make decisions, including you as the owner.
The Accounting Cycle
All of the transactions, and statements produced during the day-to-day activities of a bu