I just registered on this forum yesterday in hope of getting some clarification on some very basic questions. I live in the Isle of Man and have two children. I have worked in fairly technical roles most of my working life (areas unrelated however to Bookkeeping) so am completely new to bookkeeping. I am now wanting to re-address the work/family balance by becoming a self-employed bookkeeper - once I feel I have the appropriate knowledge under my belt. I have just taken the Level 1 - Award in Bookkeeping qualification with the IAB. I am now looking to bridge that gap between study text and reality - which I am sure can be quite a large gap! I would also like to check my understand of the Level 1 study text which covered single entry, manual bookkeeping upto the point of extracting a balance sheet and P&L. So, here come the questions:
If I was to 'do' my husbands books (he is a VAT registered self employed plumber), what information exactly would the accountant require from me in order to generate the Balance Sheet and P&L. As far as I understand the Level 1 study text I would take it as:
1. An analysed cash book - detailing all receipts and payments. A VAT breakdown of each transactions along with the analysis of each transaction i.e. travel, stationery etc.
Qu:Is this what I would use to calculate the VAT owed/refund due?
2. A bank reconciliation sheet which deals with the differences between the cash book entries and the Bank Statement - this would then be used to bring the cash book up to the end of the quarter.
3. Day books - which list all invoices issued and received and credit and debit notes issued and received.
Qu: Do companies actually keep Day books? - is this not in part a duplication of what is recorded in the analysed cash book?
Qu: As far as I understand credit/debit notes are only recorded in the day books and not in the analysed cash book, is this correct?
4. Petty Cash book - which has been crossed checked with the petty cash box contents etc. My husband does not have a petty cash float - so this would not be applicable for him.
Qu: My husband does not have a petty cash system but he does purchase very rarely things like stamps with cash out his pocket/or with our joint bank account debit card. He does not refund the price of these purchases back this into company bank account. How do I reflect these on the analysed cash book? Do I show a receipt for an 'Owners Loan' for all these 'other purchases'?
I apologise if my questions seem simple and very basic however as I said I am a complete newcomer to the Bookkeeping arena. I am home study with these exams so I do not have a support group/tutor to direct these questions at. Hope somebody can help!
Aww I love the Isle of Man! GREAT TAX SYSTEM!!! Ha! Looking forward to spending the weekend at TT!!
Assuming the IOM VAT rules for cash accounting are the same as the UK...
1. If on cash accounting for VAT, yes you could use the cashbook, or, if on standard VAT scheme, you would use day books.
You have to judge what's best for cashflow when deciding on cash basis. For example, if he gets paid on the day he invoices customer, but pays supplier 2 months later, it might be better to go onto invoice accounting, as you pay the sales VAT at the same time either way, but get the purchase VAT back quicker.
3. Its likely that you will be ok with using just an income and expense cashbook if he is small business. At the year end, you can provide the accountant with copies of invoices which have not yet been paid, so that they can make the necessary adjustments in the accounts (I am not sure about IOM accounting rules regards cash basis accounts - I dont even know who sets the IOM rules to be honest! Might be no difference!.)
4. The cashbook's can have a bank and cash column - but the cash column really represents items paid privately (capital introduced), or, income taken straight to ones pocket (drawings)!
