{"id":5031,"date":"2018-10-01T10:00:46","date_gmt":"2018-10-01T09:00:46","guid":{"rendered":"https:\/\/www.sage.com\/en-gb\/blog\/?p=5031"},"modified":"2026-01-29T10:29:19","modified_gmt":"2026-01-29T10:29:19","slug":"book-of-accounts","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-gb\/blog\/book-of-accounts\/","title":{"rendered":"How to set up a book of accounts: Tips for your business"},"content":{"rendered":"
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\n\t\t\t\t\t\t\tMoney Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t
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\n\t\t\t\t\t\tHow to set up a book of accounts: Tips for your business\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t

\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t

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\n\t\t\t\n\t\t\t\t\"\"\t\t\t\tNeil Martin<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t<\/div>\n\t\t<\/div>\n\n\n\n

In the age of modern software, when the computer can do much of the hard work for you, setting up a book of accounts is straightforward. However, knowing how a book of accounts works is still a good thing to learn.<\/p>\n\n\n\n

The first thing to know is that a book of accounts can be physical (using good old paper and ink) or online. Indeed, most small companies opt for online accounts as this lessens the workload and helps to ensure they make fewer mistakes.<\/p>\n\n\n\n

There are two key elements that make up your book of accounts: the sales ledger and the purchase ledger. These are the vital building blocks and without them, you are not going to get very far. When it comes to the accounting system you\u2019ll be using, most small businesses<\/a> follow what\u2019s known as cash-basis accounting.<\/p>\n\n\n\n

A cash-based business will summarise its sales invoices with a sales ledger and summarise purchases with a purchase ledger. This is the simplest way to keep records. You record income when you receive money from a customer and record expenses when you pay them.<\/p>\n\n\n\n

This helps you manage cash flow because it only records revenues and expenses when they appear in your account. Bigger businesses tend to practice accrual-basis accounting.<\/p>\n\n\n\n

Accounting records<\/strong><\/h2>\n\n\n\n

It\u2019s important to note that nowadays, most people refer to the book of accounts as the accounting records, and that title gives the game away. All businesses need to keep accounting records, which are made of sales invoices, purchase invoices and bank statements.<\/p>\n\n\n\n

Sid Moore is the owner of South Manchester-based practice Moore Accountancy<\/a>. She says: \u201cEvery business needs to keep accounting records. Some people call it \u2018book of accounts\u2019, some people call it \u2018cash book\u2019, I call it \u2018accounting records\u2019.<\/p>\n\n\n\n

\u201cAccounting records record your sales and your expenditure, and there\u2019s many ways of doing this. It can be very simple, or it can be quite detailed, depending on the type of business you have and how good your IT literacy is.<\/p>\n\n\n\n

\u201cYour accounting records are a combination of your bills invoices and your purchase invoices, and your bank statements. And for a very small cash-based business, they will literally have a summary of their sales invoices, their sales ledger, and a summary of their purchases, their purchase ledger.<\/p>\n\n\n\n

\u201cThese different building blocks create your accounting records, so it\u2019s important to ensure you have records detailing those different elements.\u201d<\/p>\n\n\n\n

\"Using
Using software for record keeping will save you time<\/figcaption><\/figure>\n\n\n\n

How to keep records<\/strong><\/h2>\n\n\n\n

Your book of accounts could be a physical book that compares sales on one side and expenses on the other. Or you could set up a simple spreadsheet document on your computer with a tab for sales invoices and a tab for expenditure. Of course, online accounting software<\/a> simplifies this further by taking the data and automatically collating and comparing invoices with sales.<\/p>\n\n\n\n

Sid says: \u201cIn terms of types of record keeping and creating the books of accounting records, you can have something simple like Excel, where you can have a tab showing each thing.<\/p>\n\n\n\n

\u201cSo you can have a tab showing sales invoices and the money that\u2019s been coming in from that and you can have another tab showing your purchase invoices, the expenditure you\u2019ve incurred, and then you will compare that. And that will be the core accounting records that you keep.<\/p>\n\n\n\n

\u201cSome of our smaller businesses stick with manual book and records, a big cathedral book. On one side is all their cash in, i.e. their sales, and on the other, is their cash out, their purchases. This might be done over via the bank, a debit card or paying cash.<\/p>\n\n\n\n

\u201cOr you can use online bookkeeping, where a bank feed comes through and you record your invoices and you record your sales and it automatically matches off.\u201d<\/p>\n\n\n\n

Other accounting methods<\/strong><\/h2>\n\n\n\n

If you run a larger business, your book of accounts may include debtors and creditors, so it records monies not yet received, or paid. This is called accrual accounting and it records income when the sale is made. The best thing to do is to decide which accounting method you prefer at the outset and use this method both internally and for tax purposes.<\/p>\n\n\n\n

Sid says: \u201cA bigger business will have a lot more involved accounting records. They will have what\u2019s called sales ledgers with debtors and purchase ledgers, which have creditors because they may offer credit to people. They may make a sale and say to people they have seven days to pay them, in which they are several different ways to record it, and that\u2019s more detailed.<\/p>\n\n\n\n

\u201cAs a business, you need to ensure that you keep good records. It\u2019s essential that you understand your sales and expenditure.\u201d<\/p>\n\n\n\n

Accounting records top tips<\/strong><\/h2>\n\n\n\n

Here are some tips and pointers when it comes to your accounting records:<\/p>\n\n\n\n

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  1. You can streamline your book of accounts using online accounting software<\/li>\n\n\n\n
  2. Ensure your record keeping details sales and purchases<\/li>\n\n\n\n
  3. Small businesses use cash-basis accounting to manage cash flow<\/li>\n\n\n\n
  4. Choose the same method internally and for tax reporting.<\/li>\n<\/ol>\n\n\n\n

    Book of accounts managed digitally<\/strong><\/h2>\n\n\n\n

    Oliver Squirrell, founder and MD of Pop My Mind, a business that creates unique creative ecosystems for people and businesses, says his company has no physical book of accounts, as everything is managed digitally via software.<\/p>\n\n\n\n

    He adds: \u201cOur book of accounts covers quite a lot of detail, including what\u2019s coming into the business, what\u2019s going out, any direct debits, and bills that we are paying ongoing.<\/p>\n\n\n\n

    \u201cIt breaks down the different types of income that they have as well, which is important to understand, including the balance of where the income is coming from, which all in all gives us a really detailed picture.\u201d<\/p>\n\n\n\n

    For Oliver, peace of mind that everything tallies up and expectations are meeting reality, is the crucial thing.<\/p>\n\n\n\n

    How do you manage your records and what sorts of challenges have you overcome? Let us know in the comments below.<\/p>\n\n\n\n

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    A free guide to managing your cash flow<\/h2>\n\n\t\t\t\t\t\t\t\t\t
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    Our guide is packed with expert advice to help you stay on top of your cash flow.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tGet your free guide<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\"\"\t\t\t<\/div>\n<\/div>\n\n\n

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    In the age of modern software, when the computer can do much of the hard work for you, setting up a book of accounts is straightforward. However, knowing how a book of accounts works is still a good thing to learn. The first thing to know is that a book of accounts can be physical […]<\/p>\n","protected":false},"author":321,"featured_media":3393,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[6],"tags":[23,24],"business_type":[4],"lilypad":[],"context":[],"industry":[],"persona":[73,74],"imagine_tag":[109],"coauthors":[450],"class_list":["post-5031","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","tag-bookkeeping","tag-cash-flow","business_type-small-business"],"sage_meta":{"region":"en-gb","author_name":"Neil Martin","featured_image":"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2017\/12\/GettyImages-642320213_super.jpg","imagine_tags":{"109":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice UK","distributor_original_site_url":"https:\/\/www.sage.com\/en-gb\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/5031","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/users\/321"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/comments?post=5031"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/5031\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media\/3393"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media?parent=5031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/categories?post=5031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/tags?post=5031"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/business_type?post=5031"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/lilypad?post=5031"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/context?post=5031"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/industry?post=5031"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/persona?post=5031"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/imagine_tag?post=5031"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/coauthors?post=5031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}