Preparing for Your Annual Accounts

5. Purchases and Sales

Your accounting records should be clear and logical as this saves time for everyone involved. Also keep the recording simple and record in a way that is useful to your business.

5.1 Cross-referencing, for example recording an invoice number, means that any one transaction leaves a trail that can be traced right through the records.

5.2 List sales made before the year end, but not yet paid for, as outstanding debtors. Include the amount, invoice number and invoice date.

• Note any invoices that you suspect may not be paid, with a brief explanation.The accountant may make a 'provision for bad debts'. This effectively cancels the sale in your accounts.

5.3 List purchases made before the year end, but not yet paid for, as outstanding creditors. Include the amount, the supplier's name and the payment due date.

• Note any invoices you dispute and do not expect to pay, with a brief explanation.

5.4 As general good practice, it is always best to list and analyse your debtors and creditors by date (an 'aged' list).

It is then immediately apparent where problems may arise, such as bad debts. This is easier if you use accounting software rather than relying on manual records.

• How much of your overdraft is used to provide your customers with free credit?