Fundamentals of business Accounting

Accounting: The Age-Old Profession, Employing New-Age Technology

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." (Mr Micawber, quote from David Copperfield, by Charles Dickens)

The 19th century and the beginning of the accountancy profession

Accountancy as a profession in the UK started to develop in the first half of the 19th century. It grew largely from new laws on bankruptcy, insolvency, and the winding up companies. In the 19th century, landing up in the debtor’s jail was the fear of many, and of course, Charles Dickens’ father, whom the author described as "a jovial opportunist with no money sense" was imprisoned in Marshalsea Debtors’ Prison in Southwark under the Insolvent Debtor's Act 1813 because he owed a baker, James Kerr, £40 and 10 shillings. As Dickens wrote, finance is "splendid, massive, overpowering, and impracticable". Dickens felt that accounting was so beyond human control that only luck could help the hapless out in the face of the chaos he perceived was created by "numbers" and "paperwork". We know this isn’t true, but accounts can be daunting to some people, and it can be complex; now as then, people still end up in a mess with their personal and business finances.

Fast forward to the 21st century and the technological age

The rudiments of accounting remain the same in the 21st century, although the commercial world is now one of a multitude of laws relating to business and taxation, many pitfalls, and fierce competition from a global marketplace. Accountants have never been more necessary than now! Whatever the era, the rules of finance remain the same: your accountant, if you have one, should be professional in every respect, trustworthy, dependable, and should be keeping his or her expert eye on the bigger picture while you run your business. At its most basic, business and personal finance is the same as it ever was—as Mr Micawber suggests in the quote, keep your eye on the money coming in and the money going out, and beware if your expenditure is greater than your income. Really, the end goal has not changed: you should not spend more than you earn, you should pay your debts and taxes and look for ways to maximise your income or wealth. If you fail to keep an eye on your business or personal finances then disaster is certain not to be far off.

The self-assessment tax return deadline

In around October time every year without fail, a panic erupts among taxpayers who realise that the time has come to file their self-assessment tax return and find the money to pay the tax due by January 31st. Although owner managers of limited companies will file accounts at whatever time of year their year-end falls, many, many taxpayers are obliged to file a SA tax return before January 31 annually. If you let out a room in you house, have a buy-to-let, earn income online, or earn any income that isn’t accounted for through your business or via PAYE, over the allowable threshold, then lawfully you must declare this additional income for tax purposes by filling out a self-assessment tax return and paying any tax due by 31 January.

Expenses, what to include?

Taxpayers often face a dilemma when compiling and filing their own tax returns and business accounts as to what exactly to include. HMRC does offer guidance, but it can still be very confusing. Are you sure beyond doubt of the business expenses you can claim and those you cannot; are you certain of how much to charge for your home-as-office, your mobile phone, broadband connection, mileage? Is your business income accurately recorded, do you know what income is due and what costs you have yet to pay on the tax year for which you are filing? Do you know whether it would be beneficial to you to form a company, if you haven’t already, and whether you should or should not become VAT registered?

Hire an expert accountant with online accounting software

To avoid the panic and stress of doing your self-assessment tax return there is a very simple solution: hire an accountant and make sure it is a firm with online, cloud-based bookkeeping and accounting software. This means that your accounts will be in order in real time, throughout the year, and you will have a better picture of your business and personal finances, it will also give your accountant many opportunities for tax planning.Like anything else, having a systematic approach to your accounts is a habit you will form. It will become part of a regular monthly 20 minutes loading up your receipts and invoices and checking your bank statements online. If you do that, your accountant will do the rest. It is easy, stress-free, and definitely beneficial.

How do you hire an accountant?

Easy, get a recommendation, or trust yourself to DNS, the well-known, highly regarded accountant for small businesses, contractors, and freelancers. DNS provide effortless accounting, delivered by highly qualified experts, with the aid of cloud-based bookkeeping and accounting software that is provided free to all DNS clients, and a service that comes with a guarantee that you will never be late filing your tax return or be late paying the tax due.

Ask for help now from a professional

Pay a visit to DNS today, watch our videos about why so many freelancers, contractors, small businesses and other individuals choose DNS. Sign up for free, and get immediate access to our cloud-based bookkeeping and accounting software. If you haven’t done it yet, if you are still thinking about it, if your accounts are in disorder and you don’t know where to turn, professional help is at hand. It will be far more efficient to pay an accountant to file your tax return than spend weeks of your time trying to complete one if you have no idea what you are doing. It is far better to be in control of your finances than to leave it all in chaos.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.