Bookkeeping & Accounting All-in-One For Dummies, UK Edition

Introduction 1 About This Book 1 Foolish Assumptions 1 Icons Used in This Book 2 Beyond the Book 3 Where to Go from Here 3 BOOK 1: BASIC BOOKKEEPING 5 Chapter 1: So You Want to Do the Books 7 Delving into Bookkeeping Basics 8 Defining and Maintaining a Ledger 12 Using Bookkeeping Tools to Manage Daily Finances 13 Running Tests for Accuracy 14 Chapter 2: Getting Down to Bookkeeping Basics 19 Bookkeeping: The Record-Keeping of the Business World 19 Wading through Basic Bookkeeping Lingo 21 Pedalling through the Accounting Cycle 24 Understanding Accounting Methods 26 Seeing Double with Double-Entry Bookkeeping 28 Have a Go 32 Answering the Have a Go Questions 34 Chapter 3: Outlining Your Financial Roadmap with a Chart of Accounts 37 Getting to Know the Chart of Accounts 38 Starting with the Balance Sheet Accounts 39 Keeping an Eye on the Profit and Loss Accounts 46 Setting Up Your Chart of Accounts 50 Have a Go 51 Answering the Have a Go Questions 52 Chapter 4: Looking at Ledgers 55 Developing Entries for the Ledger 56 Posting Sales Invoices 57 Posting Purchase Invoices 59 There’s an App for That! 61 Entering Items into the Nominal Ledger 62 Cashbook/Bank Transactions 63 Introducing Control Accounts 68 Understanding How the Ledgers Impact the Accounts 71 Adjusting for Nominal Ledger Errors 73 Have a Go 75 Answering the Have a Go Questions 77 Book 2: Bookkeeping Day to Day 81 Chapter 1: Planning and Controlling Your Workload 83 Introducing Checklists 84 Sorting Out Your Sales Invoices 84 Entering Your Purchases Invoices 86 Checking Cash Payments and Receipts 88 Using a Bank Feed to Reconcile Your Bank Account 90 Entering Your Journals 91 Controlling Your Books, Records, and Money 91 Have a Go 94 Answering the Have a Go Questions 95 Chapter 2: Counting Your Sales 97 Reviewing Your Sales 97 Recording Your Sales in the Books 101 Adjusting Your Sales 108 Monitoring Trade Debtors 113 Accepting Your Losses 114 Have a Go 115 Answering the Have a Go Questions 119 Chapter 3: Buying and Tracking Your Purchases 121 Identifying Different Types of Purchases 122 Keeping Track of Stock 123 Buying and Monitoring Supplies 132 Staying on Top of Your Bills 132 Have a Go 134 Answering the Have a Go Questions 135 Chapter 4: Doing Your Banking 137 Making Sure that the Closing Cash Is Right 138 Reconciling Bank Accounts 139 Have a Go 146 Answering the Have a Go Questions 147 Book 3: Undertaking Monthly and Quarterly Tasks 151 Chapter 1: Adding the Cost of Value-Added Tax (VAT) 153 Looking into VAT 153 Registering for VAT 158 VAT Returns in the Digital Age 158 Chapter 2: Employee Payroll and Benefits 167 Staffing Your Business 168 Running Your Payroll 169 Taxing Benefits 181 Posting Your Payroll Entries 182 Settling Up with HM Revenue & Customs 183 Handling Payroll Year-End 184 Have a Go 185 Answering the Have a Go Questions 186 Chapter 3: Adjusting Your Books 189 Adjusting All the Right Areas 190 Checking Your Trial Balance 199 Changing Your Chart of Accounts 200 Have a Go 202 Answering the Have a Go Questions 203 Book 4: Working to Prepare Financial Statements 207 Chapter 1: Producing a Profit and Loss Account 209 Lining Up the Profit and Loss account 209 Formatting the Profit and Loss Account 210 Preparing the Profit and Loss Account 211 Deciphering Gross Profit 214 Monitoring Expenses 215 Using the Profit and Loss Account to Make Business Decisions 216 Testing Profits 218 Branching Out with Profit and Loss Account Data 220 Have a Go 222 Answering the Have a Go Questions 223 Chapter 2: Developing a Balance Sheet 227 Breaking Down the Balance Sheet 227 Gathering Balance Sheet Ingredients 229 Presenting Your Balance Sheet 234 Putting Your Balance Sheet to Work 237 Have a Go 239 Answering the Have a Go Questions 241 Chapter 3: Cash Flows and the Cash Flow Statement 247 The Three Types of Cash Flow 248 Setting the Scene: Changes in Balance Sheet Accounts 250 Using the Indirect or Direct Method? 251 Looking at Cash Flow from Operating Activities 251 Presenting the Cash Flow Statement 258 Sailing through the Rest of the Cash Flow Statement 261 Free Cash Flow: What on Earth Does That Mean? 265 Scrutinising the Cash Flow Statement 265 Book 5: Accountants: Managing the Business 267 Chapter 1: Discovering Different Business Types 269 Finding the Right Business Type 270 Tax Reporting for Sole Traders 273 Making Tax Digital — Income Tax Self-Assessment 274 Filing Tax Forms for Partnerships 276 Filing Returns for Limited Companies 277 Introducing Software-Only Filing 278 Have a Go 279 Answering the Have a Go Questions 279 Chapter 2: Choosing Accounting Methods 281 Decision-Making behind the Scenes in Profit and Loss Accounts 282 Calculating Cost of Goods Sold and Cost of Stock 286 Identifying Stock Losses: Net Realisable Value (NRV) 290 Managing Your Stock Position 291 Appreciating Depreciation Methods 291 Collecting or Writing Off Bad Debts 295 Reconciling Corporation Tax 295 Dealing with Foreign Exchange 296 Two Final Issues to Consider 297 Have a Go 298 Answering the Have a Go Questions 299 Chapter 3: Managing Profit Performance 303 Redesigning the External Profit and Loss Account 304 Basic Model for Management Profit and Loss Account 306 Travelling Two Trails to Profit 310 Have a Go 323 Answering the Have a Go Questions 324 Chapter 4: Cost Conundrums 327 Previewing What’s Coming Down the Road 327 What Makes Cost So Important? 328 Sharpening Your Sensitivity to Costs 329 Putting Together the Pieces of Product Cost for Manufacturers 334 Allocating Indirect Costs Is as Simple as ABC — Not! 337 Have a Go 344 Answering the Have a Go Questions 346 Chapter 5: Business Budgeting 351 The Reasons for Budgeting 352 Budgeting and Management Accounting 356 Budgeting in Action 358 Capital Budgeting 364 Reporting on Variances 369 Staying Flexible with Budgets 370 Have a Go 371 Answering the Have a Go Questions 372 Book 6: Accountants: Working with The Outside World 375 Chapter 1: Getting a Financial Report Ready for Prime Time 377 Considering the Purpose of Annual Reporting 378 Looking at the Contents of an Annual Report 380 Making Sure that Disclosure Is Adequate 385 Nudging the Numbers 390 Sticking to the accounting Browsing versus Reading Financial Reports 393 Chapter 2: How Investors Read a Financial Report 395 Financial Reporting by Private versus Public Businesses 396 Analysing Financial Reports 400 Navigating the Notes 415 Checking for Warning Signs in the Audit Report 416 Finding Financial Facts 417 Have a Go 419 Answering the Have a Go Questions 421 Chapter 3: Professional Auditors and Advisers 425 Why Audit? 426 Who Can Audit Company Accounts? 428 What Happens during an Audit? 430 What’s in an Auditor’s Report 431 Do Audits Always Catch Fraud? 436 Auditors and the Rules 440 From Audits to Advising 442 Index 445