7 Key Documents Used in Bookkeeping

Our accounting partner explains bookkeeping is a vital component of the smooth running of a business..

 

Bookkeeping ensures that all financial figures are always accurate and up to date and can help to provide valuable insights into business performance. In the world of bookkeeping, there are several key documents that form the backbone of the whole operation.

 

 

We know how tricky it can be to stay on top of finances, and that’s why we’ve created this guide on seven key documents and the part each one plays in your bookkeeping process. Let’s take a look..

 

The Importance of Organised Documentation

You cannot overstate the importance of maintaining accurate and organised documents when it comes to bookkeeping. If you have a good system, all of your information and documents should be filed away in relevant places, making them easy to locate quickly if needed.

 

Without this, you may find you are losing valuable documents that may be needed further down the line in case of disputes. You never know when you will need to showcase financial information, whether internally or externally, so make sure all documents are saved, in a good condition, and easy to locate.

 

Not only will this help resolve any issues, but it will also make it much more efficient when performing your bookkeeping, as you will know where everything is and be able to quickly find the information you need. Organised document storage is vital, and here are some of the documents you should look to store.

 

7 Bookkeeping Documents You Should Know & Use

 

Ledger

This is the beating heart of your bookkeeping, and every transaction, whether in or out, is stored inside this. This can be done online or manually in a book. Either way, it is a vital document that allows for the recording, classification, and summarisation of all financial information from a company.

 

Every time an invoice or receipt is received, the details should be filled in in the correct section of the ledger. It works best when splitting up different sections, such as expenses, assets, liabilities, and more.

 

Journal

A journal is the first step before a transaction joins your ledger. This is always in chronological order, and it is where all information is originally entered.There is little classification in your journal, just a longlist of transactions that you can go back and check over if needed.

 

Every entry in your journal should contain plenty of information, such as the date and amount of the payment. The journal helps to maintain a clear and organised record of transactions detailed down in time order. Before they are transferred to the ledger, every transaction should be stored here, providing a double-entry validation that ensures accurate information every time.

 

Account Chart

An account chart, also known as a chart of accounts (COA) is a comprehensive list of all the accounts used throughout a business. These accounts are normally classified in separate sections and will be given coded names that make them easy to transcribe in ledgers and journals.

 

This is there so that when an account makes a payment, the right code can be used to link the transaction to the account, and all business information is always readily available if needed. This is an important document as it plays a big part in classifying transactions and maintaining accurate and efficient information.

 

Proof of Transaction Documents

You need to keep hold of historic source documents to provide proof for any transactions. This includes receipts, invoices, and much more. These are vital for many reasons. Firstly, they contain all of the information needed to keep a record of your transactions, including the amount of the payment, the date, and the product or service in question.

 

If there is ever a dispute, being able to show historic proof of transaction documents makes it much easier to resolve any issues. Documenting these properly also allows you to quickly scan through and spot any errors in recording or calculations that may lead to incorrect numbers.

 

Bank Statements

A bank statement is another vital document as it provides an official summary of transactions taking place from an account in a set time period, often monthly. This can be really important for checking back over your figures per month and making sure everything adds up properly.

 

If you need to verify payments or reconcile information, then having your bank statements handy can make the process much easier. When comparing the results, you may provide another document, which is a reconciliation statement. This is created by comparing the bank statement to the figures you have and keeping track of any discrepancies to make sure you’re always on top of any issues.

 

Financial Statements

Another key document is a financial statement. These provide a comprehensive overview of a company’s financial performance and position and can be used to provide information to internal team members as well as external stakeholders.

 

These are often used in management accounts, which can be crucial in helping to make business decisions and judge performance. The three main types of financial statements are income statements (also known as profit and loss statements), balance sheets, and cashflow statements.

 

When combined, these provide a clear picture of business performance and can play a key role in helping to calculate and understand your figures throughout the bookkeeping process.

 

Payroll Documents

Our final key document is to do with payroll. A large part of every business’ outgoings is paying the staff, and so this document is important to include in your bookkeeping process.

 

There are many different elements to this that need to be considered, but making sure all information is added to your financial records will ensure you are always maintaining accurate records. Keep track of payroll information for your staff, tax forms, and use these to create reconciliation reports to ensure you are working with accurate figures.

 

Bookkeeping is complex, and there are many different documents and figures that will come your way. By getting to know these seven documents, you can be sure to have a good hold on your finances.

 

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