Throughout a trading year a company is required to keep financial records on all its transactions.
The accounting records must contain adequate details on all the money received and spent. These records are used to create the company annual accounts, which must present a ‘true and fair’ view of the company’s trading.
The records will therefore contain, for example;
• All goods/services bought and sold
• Who the goods/services were sold to and/or bought from
• Any debts the company is owed by debtors or owes to creditors
Such records will take the form of credit notes, invoices, receipts, stock takes etc. and can be kept in either paper form or electronically.
HMRC will often check a company’s records with a compliance check to ensure they are paying the correct amount of tax. Companies House and HMRC require companies to keep these documents for three and six years respectively, after the end of the accounting period to which they relate.
Penalties for failing to keep adequate accounting records include significant fines or even being disqualified as a company director.
It is therefore essential to use an appropriate accounting software. Nasa Consulting advises a wide variety of clients and will help select the most effective product for each business.