Hey, im new to the forum and glad i came across it as i am terrible at grasping the whole idea of bookkeeping! My question is:
i sell a product on another site who take a cut of what i sell. They invoice me for the fees and give me a staemnt balance of which shows what i have taken minus the fees with the total i get paid. When im bookkeeping these figures, do i add the total sale as one line and the total fees as another or can i take a shortcut and just add the total (after they have taken their cut). Im not sure really how much needs to be documented in my books and whether it would help showing the fees as a seperate line for VAT purposes?
Cost of sales is what is removed from turnover to give gross profit. It is shown on the profit and loss account. Are you using some kind of software, or manual accounts?
Do you have much experience in accounts? If not it may be worth engaging the services of a good bookkeeper, it could save you time and money in the long run.
I just thought that this story is appropriate to the thread:
A complex machine has stopped working shutting an entire assembly line down. Every hour that goes by the company is losing thousands of pounds. After many hours of trying to get the machine working again, the plant manager calls in an outside expert to assess the situation.
So the expert comes in, walks around the machine, looks at the dials and screens, and finally asks to borrow a hammer. With one swift and decisive tap of the hammer the machine fires right up. Relieved, the plant manager thanks the expert and asks the expert to send the invoice right away. When it arrives there is a single line item charge of £1,000. The manager immediately calls up the expert and demands to know why hitting the machine should be worth $1000?! The expert acknowledges the concern and agrees to revise the invoice. The new invoice arrives with two line items: Hitting machine with hammer: £10. Knowing where to hit the machine: £990.
Bookkeeping is very similar. Putting figures into a computer is the easy bit.
Thanks Kris. Im using the software package 'Accountz' and no i have no previous experience in bookkeeping but would like to learn the basics at least. I find it hard to just pass it all over to a bookkeeper when i dont know the basic! ; /
While I can see where you're coming from, I get an electrician in to do my electrics because I have no idea how it works. I don't need to know to get someone in, that's their job. A good bookkeeper will help you to understand your business finances.
While it's nice to do things yourself, you could be creating a lot of extra work for yourself, wasting time where you could be earning money, and costing yourself more in the long run if you get it wrong.
I think that the problem is that you may be approaching the excercise from the wrong angle Loui.
There are a lot of people out there who use bookkeeping packages without understanding what the package is doing or why it is doing it.
Ultimately the data entered will form the basis of your financial reporting and without proper understanding of the principles behind the software your financial reporting is likely to fall short of the legal requirements.
Before starting on the computerised side of things you really need to understand what is happening "under the hood" so at least read a book such as Business accounts for bookkeeping and accountancy students by David Cox (osbourne books) to get to grips with the fundamentals so that you know why your software needs to do certain things.
I do appreciate what you are saying about not wanting to involve a bookkeepr when you don't understand it yourself. And to be honest not all bookkeepers are up to the standard of those who post on this site so you are certainly advised to know what is what before entrusting another to do the bookkeeping whilst you get on with building your business.
As I say, the above book is a good introduction to the subject and after that you should be more confident moving onto computerising your bookkeeping. There are other alternatives but run your choice by us before buying a book as there is also a lot of absolute s**t basic bookkeeping books out there which would do you more harm than good.
good luck and kind regards,
Shaun.
p.s. the above book is around 640 pages and should only be considered a very, very brief introduction. You will find that a lot of bookkeepers and accountants have amassed huge libraries of books as this is an occupation based on constant learning.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks so much for your replies Kris and Shaun. That is very helpful indeed! I will buy that book and give it a go and i will now be thinking very hard about employing a bookkeeper,
I'm not sure I understand your problem. If you sell items worth £100 and the company takes £5 commission for the sale . They send you an invoice for the £5 and a statements showing sales £100 less £5 commission and pay you £95? Am I right so far?
In your accounts the £100 is the sales. To use £95 is undervaluing your sales and will get you in trouble with VAT registration etc. So you put through sales of £100 to the bank, then put through fees of £5 paid from the bank to the company who sells the product. The net amount is £95 the same as they said you'd get. You get your bank statement in, but it shows £95 in, not £100 in and £5 out, but we know that £100-£5=£95, so select the two transactions and they match the bank amount.
Am I missing something?
Kris
-- Edited by kjmcculloch83 on Thursday 5th of July 2012 05:57:16 PM
I don't think you are missing something Kris. Loui I think is just seeing it as whatever is on your bank statement should match exactly what is in your cash book, which in this case can't be done, which means as you have stated that a little bit of thought needs to go into the rec.
Loui, you could always make sure all your postings that refer to each other have the same reference so that they are easily matched, you will probably need some system of your own to match them and make the reconciliation simpler.
-- Edited by Rhianrach on Thursday 5th of July 2012 06:04:35 PM
im adding the sales in and the fees separately but i now have a new problem i wondered if you could help with...when adding the fees into my accountz system im putting it in as 'from' my bank account to 'fees'. My question is; if the fees are not actually coming out of my account but rather being deducted from my sales by the website owner before paying me the difference, how will this tally up with my bank statements when i go to reconcile? It will only show the payment received after the fees of course. I though an accountz system was to reflect exactly what your bank accounts show?
maybe i have got the complete wrong idea about what bookkeeping is all about....im really struggling with the basic idea behind it all!
As Kris said originally when you put the full value of sales 'to' your bank this amount less the amount of fees that you have paid 'from' your account will equal the amount on your bank statement as the amount received
Thank you for your reply. I understand it will equal out but when i reconcile at the end there wont be a credit amount that reflect the actual amount that was paid in, does that get confusing when reconciling? I must say i have only reconciled once at the end of last year so far !
Providing that the payment 'from' and the payment 'to' your bank account are entered on the same date there should be no confusion at all as the 'to' amount less the 'from' amount will equal what is paid in to your bank. There will not be an amount in your accountz bank account that is the same as on your bank statement
I would go back to the book that Shaun suggests, and if you are convinced that this is really something you want to do yourself buy a copy and give it a read.
Right now I fear you could be getting yourself in to more trouble than you think. When you have read it and have an understanding I'm sure we will be able to answer any queries you have, but I wonder if we're just helping you get into more trouble now. To quote Sir Humpry, one of my favourite characters "We shall always support you as your standard-bearer, Ministerbut not as your pall-bearer"
Hi Kris, thank you for your reply. That's cleared it up ;) it was just that basic fundamental of bookkeeping i wasnt sure of, very simple but something i just wanted to clarify! I've ordered the book so will hopefully be a little more informed on the basics soon,
