Bookkeeping basics

Introduction
Your accounts can only ever be as accurate as the books you keep. In this section we explain the books you will need - and those you won't!

Cash Book
This is your single most important "book". It records all of the payments made into and out of your business's bank account. It is crucial to set up the book appropriately at the commencement of business. Your accountant will help you with this.

Sales invoice file
It is both very helpful to your business, and reassuring to the tax man, if you issue your sales invoices in strict numerical order. You should also set up a file with file dividers for each month and file your sales invoices in strict numerical order. The only exception to this rule is that unpaid invoices should be kept in a special section at the front of the file until they have been settled, at which point you should mark the invoice "paid" and also write on it the date paid, and then file it in strict numerical order. You should also regularly review the unpaid section of the file and take steps to chase up payment as often as possible.

Purchase invoice
This is a file with a file divider for each month and a front section file for unpaid bills. On receiving an invoice, file it in the unpaid section until such time as you pay it. On paying the invoice you should write "paid" and the date on the invoice itself, and then transfer it from the unpaid section of the file to the section for the month in which you made the payment. You should also, of course, ensure that the payment is recorded in your cashbook.

Source: http://www.freelanceuk.com/