Set up a profit and loss account for your business
Sales and other sources of business income
Business income falls into two categories for profit and loss reporting:
- sales or 'turnover'
- other income
Business sales or turnover
Your business' total sales of products and/or services in a trading year is referred to as turnover. This is the starting point for your profit and loss account.
How you record sales will vary according to your business type, size and whether you are VAT-registered. You may use a simple list or 'ledger' in a book, a tailored spreadsheet, or a computer software program.
Sales records back-up
The back-up records for your sales ledger fall into two categories, and will vary according to your business type:
- copies of sales invoices issued by you
- rolls of till receipts
- records of money you pay into the business when taking goods out for personal use
Proof of income relating to the above:
- paying-in slips
- bank/building society statements and similar
If you operate on a 'cash only' basis you must keep detailed records of your income in your sales book or ledger and be able to relate these to your expenditure, cash in hand and bank statements.
Business income: other than sales
As well as reporting sales income, you need to report income to the business from other sources, for example:
- interest on business bank accounts
- sale of equipment you no longer need
- rental income to the business
- money you put into a limited company from personal funds
Recording other income
- Record equipment sales in your sales ledger, or on a separate schedule of assets if you prefer.
- Keep a record of any rental income, for example if you sub-let part of your office to someone else.
You must keep paying-in slips and/or bank statements to account for your additional business income.