While few entrepreneurs start their own businesses because they're fond of paperwork, recording your day-to-day sales, purchases and other transactions is a must. Learn where to record what, and how often.
In order to take control of your financial recordkeeping, you must accurately record pertinent transactions. Specifically, you need to record:
Do you have more than one product line or department? If so, you may want to keep a separate set of books for each. Many entrepreneurs find separate accounting provides more meaningful information for their products. The practice may reveal that one product line or department is profitable and another is not.
Unfortunately, it may be difficult to keep a separate set of books for each product line or department. For example, some or all expenses may not apply to only one department, but must be allocated among departments. You should seek the advice of an accountant before setting up an accounting system of this nature.
Shop around for the right accounting software, and be sure to ask for your accountant's opinion. With so many options like QuickBooks, MYOB, Peachtree and online options, take the time to consider the pros and cons of each.
While many accountants will do their best to accommodate their clients' already installed software, their experience with companies of you size and (hopefully) your industry will provide real insight. If your accountant knows the software you've chosen, he or she will probably help you set it up.
If you have employees, look for accounting software that permits the use of passwords to control access to all or some of your accounting transactions. In order to prevent irregularities by your employees or others, it's wise to restrict access to your accounting records.
Whether your business is a sole proprietorship, partnership or corporation, always keep your personal transactions separate from your business transactions in your accounting software. For example, using business funds to pay for personal expenditures complicates your recordkeeping and can lead to serious tax problems. It can also result in some hefty accounting fees as you pay your accountant to sort it all out.
You record daily sales in a sales journal. To simplify your bookkeeping, we recommend a combined sales and cash receipts journal. With a journal that combines sales and cash receipts, you record all sales (cash and credit) and all cash receipts, including collection of accounts receivable, in one journal, which your software should be able to accommodate.
Entries in your sales and cash receipts journal come from the source documents you use in your business every day. These documents are sales invoices, daily cash register totals, daily cash sheets and daily sales registers.
If you use sales invoices, you will post the information from each invoice to an entry in the sales journal. If you maintain customer charge accounts, you will also be posting entries to the accounts receivable ledgers so that each customer account is up-to-date. Sales invoices should be numbered.
While you can store paper copies in file cabinets, with triplicates saved here, there, and everywhere, tracking invoices digitally makes much more sense.If you prefer a paper method, though, prepare two copies: one copy for the customer, one for you.
Preferably, you should prepare the invoices in triplicate, with two copies retained by you. File one by customer name, the other by invoice number. Include canceled or voided invoices when filing by number so you can account for all of them. The invoice should show:
Don't worry about creating a sales invoice template. Most office suites (such as Microsoft Office or OpenOffice.org) contain a number of invoice templates that may be used as a starting point to design your own sales invoice. And a quick "sales invoice" Google search will In addition, free templates may be found on a number of websites.
Recording Cash Register Receipts
If you use cash registers, daily sales can be totaled on the register. Most relatively new cash registers (those produced within the last 10 or 15 years) should be able to separately record cash sales and charge sales, and keep track of sales tax.
Some should also be able to record cash received on account. At the end of the business day, record your cash register totals in the sales journal.
Say you total the cash registers of your automotive supply store at the end of the day. The totals show cash receipts of $1,640, cash and charge sales of $1,325 and $450, respectively, which include sales tax of $75, and $315 received for payment on customer charge accounts. You will make the following entry in your combined sales and cash receipts journal:
| Debit | Credit | |
| Cash | 1,640 | |
| Accounts receivable | 450 | |
| Sales | 1,700 | |
| Accounts receivable | 315 | |
| Sales tax payable | 75 |
When you become more comfortable with bookkeeping entries, you could simplify the above entry slightly by "netting" the change in accounts receivable for the day:
| Debit | Credit | |
| Cash | 1,640 | |
| Accounts receivable | 135 | |
| Sales | 1,700 | |
| Sales tax payable | 75 |
If you don't use a cash register, you can record cash receipts on a daily cash sheet and record sales on a columnar sales register. The sales register is simply a record of each sale for the day. Total the cash sheet and sales register at the end of every day. Enter the totals in the sales and cash receipts journal.
A variety of different types of sales journals and cash receipts journals are available. To simplify your bookkeeping, we recommend a combined sales and cash receipts journal.
If you are going to be recording sales and cash receipts manually in a journal, visit an office supply store. They will have many different kinds for you to choose from. Look at the different column headings, and choose the one that best meets the needs of your business. If you will be using computer software, you probably won't have to decide which type of journal to use. Your program will probably have some type of sales and cash receipts journal, but may allow you to customize it based on your type of business.