From Lawpack's Self Employment Kit.
The most important thing to remember is to keep some sort of record for every single transaction - whether it be income or expenditure. If no record is kept how will you remember, or your accountant even know, that the transaction took place?
Some people fail on purpose to keep a proper and complete record of their income, hoping thereby to save tax. This sort of behaviour is wrong, dishonest and illegal.
On top of this, lies the fact that HM Revenue & Customs nearly always find out that this has been going on and in revenge (as it were) collect all the unpaid tax going back for as many years as necessary. They will also charge interest on the late payment and penalties (i.e. fines) as well, by way of punishment. Thus it is both wrong and not worth it to fail to keep proper and complete records.
This said, we can move on to the records. An accountant needs the following in order to prepare accounts and the law also requires you to keep:
- Cheque book counterfoils
- Invoices for expenses paid by cheque
- Invoices for expenses paid in cash
- Paying-in books
- Copy sales invoices or other vouchers giving evidence to all monies received by cheque and cash
- Bank statements
- Wages records
- Any other books in which you have recorded your transactions
At the end of the accounting period he will also need:
- A statement of money owed by you - creditors
- A statement of money owed to you - debtors
- A list of unsold stocks on hand at the end of your accounting period
Hence, as long as you have methodically kept all the above items, the accountant should have got sufficient information to prepare accurate accounts.
Remember also to keep your business records for six years.
Law stated as at 1 September, 2006