Module 8 • The financial plan 4. Record books


It is very difficult to determine exactly which record books are necessary for a specific small business. However, you will need books to obtain the necessary information to complete the financial statements. Records must always be updated as soon as transactions are concluded.


If you are uncomfortable with bookkeeping, keep in mind that accounting packages on computer make it very easy for small businesses to keep accurate records. You do not need detailed accounting knowledge. Just remember, even the smallest business must keep some sort of record to know what is going on in their business.


The table below shows the type and description of the various record books a small business may keep.


Record books Cashbook


Petty Cash Book Sales Journal Debtors Ledger Creditors Ledger General ledger


Salaries & Wages book Invoice book


Receipt Book 5. What it is used for: Record of all receipts and payments in a business


Record of all minor expenses –cash taken from a petty cash box Record of all sales and credits issued to customers


Record of all sales reflecting the amounts owed by customers Record of all purchases owed to suppliers


Record of all assets, liabilities as well as the income and expenditure of the business


Shows the payroll of the business


Record of each individual sales transaction. The Sales Journal is compiled from the invoice book.


Record of all monies received in the business Financial statements 5.1 Income statement


The purpose of an income statement is to indicate to you whether your business is viable or not. It also indicates how much profit to expect. The income statement only reflects operating results (income and expenses). It shows income over a period of time (quarterly or annually) and expenses incurred to generate that income during the same period. The assets and liabilities are not shown in the income statement.


Keep in mind that the income statements of different types of businesses will look different. The income statements of the following three types of businesses will be discussed: 1. Service business 2. Retail business 3. Manufacturing business


PAUSE FOR THOUGHT


Note the differences in the cost of sales section between the three business forms. The manufacturing business’s complexity should become apparent in the examples.


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