There are several conditions you should follow... Read on to find out why it's important to keep accounting records
You need to keep accounting records to:
• Comply with the Companies Act
• Monitor and review business performance and processes;
• Comply with the various tax acts;
• Protect yourself and third parties who do business with you;
• To get funding; and
• Make business decisions.
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Here's a checklist for you to follow to keep these accounting records
You must keep the accounting records listed below because this offers you the guarantee that you can prepare financial statements or records.
Note that you'll need these to get financial assistance or when SARS wants to audit a tax return you've submitted. Let's have a look at the checklist:
>> Cash book (records cash transactions)
This represents the actual cash receipts and payments made by your business. Only cash transactions are accounted for in these records, no accruals, provisions or sales or purchases on credit.
>> Debtors ledger (records transactions with specific debtors)
This is used to account for all credit transactions with customers, e.g. all the sales to debtors, payments made by the debtors, interest levied and adjustments are reflected in the debtors ledger.
>> Debtors list (a detailed list of all debtors with outstanding balance and aging)
This specific list displays the outstanding balance and the aging of the balance for all customers at a specific date but doesn't include detailed transactions like the debtors ledger. Please keep in mind that this is a powerful report for management to assess which receivable accounts are overdue.
>> Creditors ledger (records transactions with specific creditors)
Used to account for all credit transactions with suppliers, e.g. all the purchases from creditors, payments made to the creditors, interest levied and adjustments are reflected in the creditors ledger.
>> Creditors list (a detailed list of all creditors with outstanding balance and aging)
Displays the outstanding balance and the aging of the balance for all suppliers as at a specific date but doesn't include detailed transactions like the creditors ledger. This is a powerful report for management to assess which payable accounts are overdue.
>> Sales ledger (records detailed sales transactions)
It shows the full sales record by month to compare with previous months and targets.
>> Inventory listings (records of all inventories on hand)
Note that this represents a complete listing of all stock (raw materials, work in progress and finished goods) and contains information such as stock code, description, cost price, quantities and balances per type of stock. This is a very important report for management to use when conducting stock takes.
>> Fixed asset register (records of all fixed assets owned by the entity)
A complete list of all fixed assets (property, plant, equipment, motor vehicles, machinery etc. It can even include intangible assets if applicable) and contains information such as fixed asset number, asset description, cost price, purchase date etc. And balances per class of asset. You're also required to keep required of assets sold, when it was sold, how much it was sold for and who you sold it to.
>> Tax schedules (records of tax information of the company)
Tax schedules are the summary of all tax calculations and submissions for the entity submitted to SARS. As part of your accounting records, you should also maintain the actual returns submitted and proof of payments made to SARS.
>> General ledger (records all accounting transactions)
Keep in mind that the general ledger represents the heart of the entity and all transactions are accounted for in this record. This includes all sales, purchases, expenses,provisions, accruals and tax and Vat transactions.
>> Financial statements and annual report
You prepare annual financial statements (once a year); based on the accounting records your business keeps. These are summary reports where you can monitor and review the performance of the business.
>> Staff records and employment records
If you employ staff or have contract workers, keep the agreement/contract as part of your records. Make sure these agreements/contracts specify their remuneration, their job responsibilities, and working hours and leave entitlement. Make sure you have work permits and passports/identity documents on record too.
Include all contracts made to suppliers or third parties that relate to your business i.e. insurance contracts, licensing contracts, rental contracts, supplier and customer contracts etc.
>> Property documents
If your business owns property or fixed assets, you need to retain all documents relating to the fixed asset or property i.e. Title Deeds and car registration certificates.
Bear in mind that in case SARS audits you, or if you lodge an objection, you must keep the records until the audit or objection is finalised. This may be longer than the prescribed retention period