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Manual bookkeeping

A manual bookkeeping system can be put into place quickly. It’s a simple method of bookkeeping that can work well for sole traders or small business owners.

What is manual bookkeeping?

A manual bookkeeping system will simply record in date order the incomings (income) and outgoings (expenditure) of a business.

A business will need to retain certain documents in order to keep a track of its financial affairs. These documents may be generated by the business. Examples include documents relating to sales, which may be:

Or generated by others. Examples include documents relating to:

purchases and expenses from suppliers
banking documents such as bank statements, paying in slips and cheque books.

What is income?

Income is any amount that a business receives in the course of carrying out its business activities. The main form of income will be from sales, but other income may include:

rent received
bank interest received
loans from the business owner(s) or others
proceeds from the sale of assets owned by the business, for example vehicles, equipment or premises.

How do I record income?

Income may be received in many different ways – for example in the form of cash, cheques, bank transfer, debit and credit cards. When recording income we need to show how the income was received and what it relates to.

Below is an extract of the income record for a joinery business for the month of January 2016:

Date	Ref	Details	Amount	How received
01/01/2016	Invoice 104	Alan Jones (customer)	£525.00	Bank transfer
09/01/2016	Invoices 108 and 110	Mrs Newbold (customer)	£200.00	Cash
10/01/2016	Invoice 106	TT Supplies (customer)	£1,100.00	Bank transfer
11/01/2016		Sale of van	£1,500.00	Cheque
13/01/2016	Invoice 105	Reliance Printing (customer)	£80.00	Offset against invoice R12456
15/01/2016		Bank interest	1.12	Bank statement

Here is a breakdown of this extract with further explanations:

Example 1:

Date	Ref	Details	Amount	How received
The date the income was received.	Any document that can be referenced to the income, for example a sales invoice.	Give as much detail as is required to state whom the amount was received from and to what it relates.	The actual amount received, even if this differs from the invoiced amount.	Whether the amount was received into the bank account and how, or by other means, such as cash.

Example 2:

01/01/2016	Invoice 104	Alan Jones (customer)	£525.00	Bank transfer

This shows that £525.00 was received on 1 January 2016 by bank transfer from a customer, relating to invoice 104.

Example 3:

11/01/2016		Sale of van	£1,500.00	Cheque

This shows that the business sold a van on 11 January 2016 and received a cheque for £1,500.00.

Example 4:

13/01/2016	Invoice 105	Reliance Printing (customer)	£80.00	Offset against R12456

This shows that £80.00 was offset against an invoice from Reliance Printing, who is a supplier as well as a customer.

What is expenditure?

Expenditure is any amounts that a business pays out for in the course of carrying out its business activities. Expenditure may include:

purchases, goods which are used in order for the business to trade
administrative expenses, such as telephone, stationery, advertising, IT costs
motor and travel
loan repayments
wages
drawings, amounts taken out by the business owner of a sole trader or partnership
capital items, such as vehicles and equipment
rent and rates
taxes.

How do I record expenditure?

Expenditure may be paid out of the bank by means of cheque, cash withdrawal, bank transfer, standing order or direct debit. Or it may be paid by cash or credit card.

When recording expenditure we need to show how the expenditure was paid and what it relates to.

Below is an extract of the expenditure record for a joinery business for the month of January 2016:

Date	Ref	Details	Amount	How paid
01/01/2016		M Trent – drawings	£1,000.00	Bank transfer
07/01/2016	Receipt 1	Wickes – drill	£49.99	Credit card
08/01/2016		Lloyds bank – loan	£506.12	Standing order
12/01/2016	Receipt 2	O2 – mobile	£27.80	Direct debit
13/01/2016	Invoice R12456	Reliance Printing	£120.00	£80 offset against invoice 104, £40 cash
15/01/2016	Receipt 3	Wickes – purchases	£208.56	Credit card
15/01/2016	Receipt 4	BP – fuel	£40.00	Cash

Here is a breakdown of this extract with further explanations:

Example 1:

Date	Ref	Details	Amount	How paid
The date the expenditure was paid.	Any document that can be referenced to the expenditure, for example a receipt or invoice received.	Give as much detail as it required to state to whom the amount was paid and to what it relates.	The actual amount paid, even if this differs to the invoiced amount.	Whether the amount was paid out of the bank account and how, or by other means, such as cash.

Example 2:

01/01/2016		M Trent – drawings	£1,000.00	Bank transfer

This shows that on 1 January 2016 M Trent, the business owner, took £1,000.00 out of the business bank account.

Example 3:

07/01/2016	Receipt 1	Wickes – drill	£49.99	Credit card

This shows that a drill was purchased on 7 January 2016 for £49.99 using a credit card; the receipt has been referenced number 1, for ease of filing.

Example 4:

13/01/2016	Invoice R12456	Reliance Printing	£120.00	£80 offset against 104, £40 cash

This shows that £80.00 was offset against a sales invoice and the remainder of the amount due to Reliance Printing was paid in cash.

Can I use software to help me?

More and more businesses are using software to streamline their bookkeeping and accounting. There are many advantages to doing so:

Upload and keep track of bills, receipts and invoices.
Monitor income and expenditure in real-time.
Improve cash flow through automated invoicing.
Easier to collaborate with internal and external stakeholders such as your accountant.

Many software providers such as Receipt Bank offer free trials and are good option if you’re looking to reduce your admin burden.

What happens next?

Income and expenditure can be recorded by week, month or year; it really depends on the type and size of the business. Setting aside a time to write up your bookkeeping records each week will help to keep you on track of your paperwork and finances.

The manual bookkeeping records and any related documents are used to produce a set of accounts and complete tax returns.

If you choose to use an accountant they will be able to eliminate any items which are not allowed for tax purposes.