Some fundamental records must be maintained to build any type of account, whether it is your Individual Account, Business Account, or any other field that attracts income tax.
You cannot create or maintain an account without basic records that support your transactions. At least, you need to remember the nature and purpose of your payments and receipts. A scrap book where you note down as and when you bought something or received some money.
These basic records and documents 9for example, bills and receipts) are the most essential and important foundations for an accountant or auditor to create or maintain accounts and verify their authenticity.
Some of the essential documents are discussed below:
Purchase Bills
Bills for any purchases, whether you pay cash or credit, are to be safely maintained as your primary record. You make entries from these bills by preparing vouchers. I will discuss vouchers at a later stage. So, these bills should be kept safely either pinned to the vouchers or in separate files.If kept in files, you should maintain separate files according to the nature of transactions and the account head of that purchase and mark the files with their identity/nature. Or, you can simply arrange your bills and documents chronologically and mention the period on the file cover.
In either case, you may pin the duplicate copies or xerox of the bills along with those vouchers. Keep original bills for record-keeping in their respective topic files for any urgent reference in the future.
Sales Bills
When you make sales, you should prepare sale bills to your customers. It helps buyers understand the details of the payments made or to be made by them for those purchases. Additionally, it serves as the document for their accounting purpose.There may be cash and credit bills. Credit bills refer to Credit Sales.
In either case, a copy of the bill is to be retained by you for record and for preparing your accounting entries. Cash bills may be enclosed with your sale vouchers. But credit bills are to be kept separately in files, and copies of them are to be enclosed with the voucher (you will be preparing a Debit Voucher debiting the receiver of the goods/items).
If transactions are too many, you cannot enclose all bills with vouchers. In that case, you can give the bill number and date in your vouchers and keep the bills in files.
Asset Purchase and Sale Records:
You should maintain these bills as well to calculate the value of assets that are of significant value in your possession. If you sell any of them, keep a record of the sale value and date of sale, with supporting evidence. You can maintain an Assets Register if you are holding or selling too many assets.
Vouchers
Vouchers can be either Cash or Bank (voucher), or Journal voucher according to the nature of transactions.- Cash vouchers are made for cash transactions when you purchase in cash or sell against cash. You can keep the cash bills enclosed with the vouchers. But if you make any big purchases, like assets or equipment, keep the bills in secured files, and only copies may be attached to vouchers.
- Bank vouchers are prepared for entering bank transactions. If you purchase by giving cheques or sell by receiving cheques or drafts, these bank vouchers are prepared. Here also, tiny payment bills may be enclosed with the vouchers, and big payment bills need to be kept in relevant files for a safe record.
- Journal vouchers are prepared for transactions other than cash or bank payments. These can be prepared for monthly total entries against sales or purchase day books or for any internal transfer accounts and adjustments or for salaries and wages sheets and depreciation accounting, etc.
Business Property Documents
Whatever property you hold in the name of your business requires proof of the holder, its authenticity, and valuation. You should be able to justify your property and its valuation and its holdings duly certified or verified by some legal authority.
Passbook
If you hold Bank or Post office accounts, you should keep the passbooks properly updated from time to time, for verification purposes and making entries in your account books. Your entries should always be tallied with the passbook entries, and keep everything updated.
