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BOOKKEEPING
Richard O’Callaghan
Hook Head Training and Consulting Limited
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Why Bookkeeping
 Finance is the language of business
 It allows you to price your product or
service accurately
 Lets you know if you're making or losing
money
 Cash flow – the lifeblood of your business
 Work with bankers, suppliers, customers,
investors, debtors, creditors etc.
 Let the tax authorities know how you're
doing
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You and the Revenue

 The Revenue Commissioners require you
to keep full and accurate records of your
business
 The records you keep must be sufficient to
enable you to make a proper return of
income for tax purposes
 You must keep your records for a period of
six years unless your Inspector of Taxes
advises you otherwise
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TYPES OF
BOOKKEEPING
Manual or Computerised
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Question
 In what ways can you keep your
business records?
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Important
 Irrespective of the type of bookkeeping
system used the same information is
recorded
 The choice of system has more to do
with the nature of your business and the
volume of transactions than anything
else
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THE BASIC RECORDS

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“The Books”
 Over time a basic set of records or
“books” has developed as the standard
 Books of prime entry:
 Sales Daybook
 Purchase Daybook

 Cash Book

 Journal
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Purchases Daybook
Date Inv. Supplier Total VAT Purchases Purchase
No. Returns

8.10 1 James 121.00 21.00 100.00

Kirkpatrick
9.10 2 ESB 242.00 42.00 200.00

9.10 3 Mary Smith 10.00 0

4 James (4.20) 20.00

Kirkpatrick
5 Cash 60.5 10.50 50
Purchases
Total 433.50 69.3 350.00 (20.00)
s
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Sales Daybook
Date Inv. Customer Total VAT Sales Sales
No. Returns

11.10 1 McGrath & 363.0 63.00 300.00

Daley 0
12.10 2 Grant 121.0 21.00 100.00
Holdings 0
15.10 3 Grant (10.5) 50.00
Holdings
4

Total 484.0 73.50 400.00 (50.00

s 0 )
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Use of the Purchases and Sales

Daybook
 Every business purchase and sale is
entered in these books
 This includes both goods and services
 Includes purchases and sales where
money has not changed hands i.e. on
credit
 Division between purchases for resale and
other purchases
 May require other columns
 Discounts allowed and discounts received
 This will form the basis of your accounting
records
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Cash Book
Cash Book
Date Foli C B Date Foli C B
o ash ank o ash ank
1/10 Capital 2 3/10 Rent GL3 500
000
9/10 J SL2 500 9/10 Bank C 300
McCarth
y
9/10 Cash C 300 25/1 Wages GL6 750
0
15/1 Cash GL5 800 ESB PL2 300
0 Sales
31/1 Bal C/D 500 1
0 250
1 2 1 2
1/11 Bal B/D 300
500 300
1 300 300
250
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Cash Book
Cash In Cash Book Cash Out

Date Foli C B Date Foli C B

o ash ank o ash ank
1/10 Capital 2 3/10 Rent GL3 500
000
9/10 J SL2 500 9/10 Bank C 300
McCarth
y
9/10 Cash C 300 25/1 Wages GL6 750
0
15/1 Cash GL5 800 ESB PL2 300
0 Sales
31/1 Bal C/D 500 1
0 250
1 2 1 2
1/11 Bal B/D 300
500 300
1 300 300
250
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The Cash Book

 Shows payments and receipts
 Cash out and cash in
 Payments analysed as
 Total,
Purchase Ledger, VAT, Other Expenses
(columns as required).
 Receipts analysed as
 Total,
Sales Ledger, VAT, Other Income
(columns as required)
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The Journal
 Journal entries can be used to record
information that does not go elsewhere
 It is also used to correct mistakes
 It is part of the “double-entry” system
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THE DOUBLE ENTRY

SYSTEM
Debits and Credits
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The Double Entry System

DR CR

Asset Liability

Expense Income
Reductions in value are entered on the opposite
side of the account
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The Double Entry System

 All transactions entered must have at
least one debit and one credit
 The total value of the debits and credits
for a transaction must always be of
equal value

 There is nothing else to it

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Asset
 An asset is something owned by the
business
 Stocks

 Debtors

 Bank and cash

 Buildings

 Vehicles

 Machinery

 Investments
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Liability
 A liability is something we owe
 Creditors

 Bank Loans
 Overdraft

 Capital
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Income
 Amount earned in a period irrespective
of when the payment is made
 Sales

 Grants received
 Interest on bank account

 Returns on investments

 Sales of fixed assets

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Expense
 Amount of goods and services used in a
period irrespective of when they are paid
for
 Purchases
 Rent
 Rates
 Wages and Salaries
 Travel expenses
 Insurance
 Electricity and telephone
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Purchases/Sales Ledgers
 One account for each supplier
(purchases) or customer (sales)
 Each invoice in the purchases or sales
daybook is posted to the appropriate
account in the purchases or sales ledger
 Payments are posted from the cashbook
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Entering Transactions
 Determine whether an event should be
recorded in the accounting records at this
time
 Ifyes, determine which accounts are affected
 Determine whether each account affected is
increased or decreased by this transaction

 Can require an amount of professional

judgment in the real world
 You might have to ask your accountant how to
deal with some transactions
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RECONCILIATIONS
Purchase and Sales Ledger
Cash and Bank
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Purchase and Sales Ledger

 Add up all the ledger accounts (posted
from the daybook and cashbook line
items)
 Compare the total with the general
ledger control accounts (posted from
the daybook and cashbook totals)
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Bank Reconciliation
 Usually there are timing differences
between when data is entered in the
banks systems and when data is entered
in your system and this results in a
discrepancy between your balances and
the banks balances
 The goal of reconciliation is to eliminate
these timing differences
 Once this is done any remaining
discrepancy is due to error rather than
timing
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Causes of Difference
 Lodgements not yet appearing in the bank
statement
 Cheques written on your account(s) not yet
appearing in the banks records
 Bank interest not yet recorded in your
books
 Bank charges not yet recorded in your
books
 Direct debts not yet recorded in your books
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The Bank Reconciliation

t

Process
 Amend your records for those items
correctly appearing on your bank
statement, but not yet recorded in your
books
 Do bank reconciliation statement
 Add in cheques/payments received not yet
credited
 Remove cheques written not yet presented
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Undertaking a t

Reconciliation
 Cash Book Balance
 Add direct credits not yet written
 Less direct debts

 Amended cash book balance

Amended CB balance equals BS balance
 Bank Statement balance
 Add receipts not yet lodged/credited
 Less cheques not yet cashed

 True cashbook balance

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COMPUTERISED
ACCOUNTING
SYSTEMS
Using IT to keep the books
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Accounting and IT
 Huge developments in the last number
of years
 Basic packages very cheap
 Free open source products also available
 Quite easy to use
 Examples
 Sage,
Red Books, MYOB, TAS Books, Intuit,
QuickBooks
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Basic Accounts System

 Customers and sales ledger
 Suppliers and purchasers ledger
 Accounts and nominal ledger
 Cash and bank
 VAT
 Minimum Reports
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Other Software t

Requirements
 Payroll
 Mostfirms will have employees so will need to
pay them
 Receipts and invoicing
 Statements
 Marketing and analysis
 Multi-Currency
 Multi-Company
 Sales and purchase orders
 Stock Control
 eBanking ………………………
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WHERE TO NEXT?
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The Books are Done, Now

t

What?
 The books are done, we are now moving
to the creation of the accounts

Assets Liabilities Balance Sheet

Expenditure Income Profit and Loss Account

Receipts Payments Cash Flow Statement

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End of Period Procedures

 Trial Balance
 a listing of all general ledger accounts,
with balance
 total debits must equal total credits
 if not, must correct errors before proceeding
further
 Adjusting journal entries
 record end of period adjustments that are
not supported by transactions
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Operating Statement
 The difference between costs & income
 Profit
& loss accounts (commercial)
 Income & expenditure accounts (I & E)

 Shows where the resource was spent

 Covers a period of time
 Matches expenses and income to time
period
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Basic Profit and Loss

t

Account
€
Income X
Pay expenses (X)
Non-Pay expenses (X)
Net Surplus/(Deficit) X
Previous surplus/(deficit) b/f X
Retained Surplus To Balance Sheet X
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The Balance Sheet

 Is a position statement which evaluates
wealth at a point in time.
 It considers capital costs.
 Consists of assets and claims on those assets

Assets (owned) Liabilities

Fixed Current
liabilities
Current Loans
Owners capital
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The Balance Sheet t

Fixed Assets 1000

Current Assets
Stock 150
Debtors 250
Cash 200 600

Current Liabilities
Creditors 150
Overdraft 250 (400)
Net Working Capital 200
Capital Employed 1200
Long Term Loans (300)
900
Capital
Original Owners 700
Retained surplus 200
900
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Cash Flow Statement

 Record of cash in and cash out for a
period
 Net Cash inflow from operating activities
 Dividends received
 Returns on investment and servicing of finance
 Taxation
 Capital expenditure
 Sales of fixed assets
 Investments in subsidiaries, joint ventures and
associated undertakings
 Equity Dividends paid
 Financing
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CONCLUSION
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Conclusion
 Finance is the language of business
 Bookkeeping is the first step in the
communications process
 Need to keep minimum records