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Features Of An Adequate Book keeping System

 

Whether single entry or double entry is selected, a bookkeeping system should have as a minimum the
following component parts:

1) Income Register: This records and details money received by the business. It's especially important from a tax audit standpoint to be able to track the nature of the business deposits and differentiate between taxable and nontaxable sources. This income should be in balance with your bank statements, and supported by sales slips, invoices, register tapes or any documents used in the sales process which are stored separately.

2) Disbursements Record: This classifies, categorizes, and summarizes the expenses paid out for the business. Reimbursements and cash payments are handled the same way as checks. These expenses are recorded according to the date, check number, amount, and expense category. Further, all expenses should be backed up with an invoice or cash receipt which are stored separately.

3) Petty Cash Vouchers: For minor, incidental expenses where writing a check would be a nuisance(such as for office coffee, stamps, etc.), the use of a petty cash system is recommended. A check is written to fund the petty cash box for a designated amount. Money is taken out to pay for these small items(usually under $5), and the receipts are recorded on petty cash vouchers. Periodically, another check is written to replenish the petty cash fund.

4) Travel & Entertainment Reports: For tax purposes, contemporaneous records must be kept for such expenses as food and entertaining, use of vehicle, outside travel, and other employee paid business expenses to be reimbursed. This T & E log breaks down the expenses per employee, and per category. In addition, back-up receipts where required for these expenses must be stored in case of audit.

5) Equipment Register: This records all assets/equipment bought or disposed of by the business. It shows the dates involved, purchase amounts, check number, supplier's names, and disposition details. For calculating depreciation, and any tax consequences upon disposition, this register is highly recommended.

6) Payroll Register: A separate, detailed record is in order for controlling various aspects of payroll. Records verifying the accuracy of how payroll is calculated, taxes are credited and deposited, overtime is calculated, etc., are mandatory.

7) Insurance Log: Business insurance policies are identified and detailed as to the type of coverage, premium costs, policy numbers, name of insurer, effective policy dates, and expiration dates(to avoid unwanted loss of coverage).

8) Accounts Receivable Control Ledger: This helps you keep track of who owes the businesses, how much is owed, and for how long it has been owed. It is essential to maximize your cash flow situation, and to minimize business bad debts. Accounts receivable are usually tracked according to
their "age" using 30 day, 60 day, 90 day, and 180 day cycles.

Please understand that these eight features represent the minimum for an adequate bookkeeping system. The nature and type of business dictates what other features or customization should occur. In fact, many business types customize their systems; restaurants, automotive businesses, manufacturing, and others have their own particular nuances that need to be considered in setting up a system.

One Response to Features Of An Adequate Book keeping System

  1. Fred says:

    Really liked what you had to say in your post, Features Of An Adequate Book keeping System | Bookkeepers Now, thanks for the good read!
    — Fred

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