ENTREPRENEURSHIP

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Business Records

Module 014 | Business Records

A business record is a document (hard copy or digital) that records a business

dealing. Business records include meeting minutes, memoranda, employment
contracts, and accounting source documents.

It must be retrievable at a later date so that the business dealings can be

accurately reviewed as required. Since business is dependent upon confidence
and trust, not only must the record be accurate and easily retrieved, the
processes surrounding its creation and retrieval must be perceived by
customers and the business community to consistently deliver a full and
accurate record with no gaps or additions.

Most business records have specified retention periods based on legal

requirements and / or internal company policies. This is important because in
many countries (including the United States) many documents may be
required by law to be disclosed to government regulatory agencies or to the
general public. Likewise, they may be discoverable if the business is sued.
Under the business records exception in the Federal Rules of Evidence, certain
types of business records, particularly those made and kept with regularity,
may be considered admissible in court despite containing hearsay.

Objectives:

1. Understand the importance of keeping a business record.

2. Identify the duties and responsibilities of a bookkeeper.

Record Keeping

Record keeping is important in a business for it is the only way to inform the
entrepreneur how the business is doing. In order to analyze the ‘health’ of your
business you need data! Therefore, a systematic process of gathering data and
recording it should be set up. The following documents should be kept:
 Production records;
 Operation records such as labor, farm inputs, tools and equipment
costs;
 Cash transactions.
Importance of Record Keeping

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 You might be thinking just how critical is the keeping of records? It is
important to keep records for the following reasons:
 Future reference;
 Keeping track of business transactions;
 Filing of taxes;
 Compiling final accounts.
In order to fulfil the needs identified above you will need different sets of
records. An entrepreneur should maintain records to meet his or her business
requirements. The following are examples of records that can be maintained:
 Credit records
 Debtors records
 Production records
 Cash book
 Purchases records
 Stock records
 Assets records
Process of keeping of records
An entrepreneur should entrust record keeping to a knowledgeable person.
Records are a legal requirement. Records help an entrepreneur keep track of
business transactions, aid in the filing of taxes, compile final accounts and act
as a future reference. Record types include Credit records, Debtors records,
Production records, Cashbook, Purchases records, Stock records and Assets
records. As the business becomes more sophisticated, it will be necessary to
hire a knowledgeable bookkeeper or accountant.

The Duties and Responsibilities of Bookkeepers

A bookkeeper's central role is to maintain financial records for a company or

organization. To do the job effectively, you must have detail-oriented skills
that allow you to keep up with company expenditures, income, payroll and tax
requirements. Familiarity with accounting software is beneficial because most
companies use these programs to report transactions, issue payments and
balance accounts. If you're highly organized and enjoy working with numbers,
a job as a bookkeeper might be the perfect way to get your name on the payroll
ledger.
Accounting
As a bookkeeper, the bulk of your time is spent on accounting tasks. For
example, you're expected to deposit funds from clients or patients, make
payments to vendors who provide services to keep the office running, print
payroll checks or issue pay electronically, balance bank accounts and issue
expense account reimbursements. Financial transactions must be entered in
the accounting software program on a daily basis so account balances
accurately reflect income and outgo. Many bookkeepers also prepare reports
-- financial, auditing, accounting and tax -- on a monthly or quarterly basis.
Administration
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Business Records

Bookkeepers must be organized, trustworthy and thorough with

administrative tasks. Since bookkeepers are responsible for handling
company finances --including cash -- they must be responsible with each
transaction so funds aren't misplaced or improperly allocated. Receipts,
reports and financial documents must be kept on file so there's an explanation
for every financial transaction. As a bookkeeper, you'll have a steady work flow
so you must keep up with administrative tasks, so you don't get behind on
financial obligations, accounting demands or paperwork requirements.
Office Communication
A bookkeeper must meet with department supervisors and other managers to
discuss budget needs and inventory demands. Without effective
communication, you won't know what purchases have been made and can't
enter all transactions in the accounting software program. You're also
responsible for getting receipts from employees and issuing expense account
reimbursements. Communicating with coworkers on a daily basis and creating
procedures for receipt submission and expense account reimbursements can
help your work day flow smoothly.
Education and Salary
Even though a high school diploma is all you need to become a bookkeeper,
some companies prefer to hire bookkeepers with further, formal education.
College coursework in accounting, bookkeeping or a related business field can
help you stand out among applicants. Previous clerical experience and
knowledge of accounting software programs are also beneficial for
bookkeeping positions. According to the U.S. Bureau of Labor Statistics, the
median salary for bookkeeping, accounting, and auditing clerks was $34,000,
as of 2010. Employment of bookkeepers is expected to grow 14 percent from
2010 to 2020, as fast as the average for all occupations. According to the BLS,
job growth for bookkeepers is largely driven by overall economic growth. As
the number of businesses and organizations increases, more bookkeepers will
be needed to maintain their financial records.

Bookkeeping Basics

Millions of small business owners and startup entrepreneurs are masters at

creating great products and services, building awesome teams and winning
over customers. Many of them, however, would probably flunk basic
bookkeeping.
But if you – the business owner – don’t understand the different types of
“accounts” your bookkeeper uses to organize your finances, measuring the
success (or failure) of your efforts will be futile. Being deft at digital marketing,

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for example, isn’t enough if you don’t have a clear financial picture of your
business and run headlong into cash flow problems.
What do your accounts receivable look like? Are you constantly paying your
own bills late? Not sweating the small stuff like understanding your own books
is trouble in the making, says Lita Epstein, who designs online courses about
reading financial reports and is the author of Bookkeeping Kit for Dummies
(Wiley, 2012).
Here are basics of the 10 most common types of bookkeeping accounts for a
small business that you should know:
Cash. It doesn’t get more basic than this. All of your business transactions pass
through the Cash account, which is so important that often bookkeepers
actually use two journals -- Cash Receipts and Cash Disbursements -- to track
the activity.
Accounts Receivable. If your company sells products or services and doesn’t
collect payment immediately you have “receivables” and you must track
Accounts Receivable. This is money due from customers, and keeping it up to
date is critical to be sure that you send timely and accurate bills or invoices.
Inventory. Products you have in stock to sell are like money sitting on a shelf
and must be carefully accounted for and tracked. The numbers you have in
your books should be periodically tested by doing physical counts of inventory
on hand.
Accounts Payable. No one likes to send money out of the business. But it’s a
little less painful if you have a clear view of everything via your Accounts
Payable. Good bookkeeping helps assure timely payments and – importantly
– that you don’t pay anyone twice. Paying bills early can also qualify your
business for discounts.
Loans Payable. If you’ve borrowed money to buy equipment, vehicles,
furniture or other items for your business, this is the account that tracks
what’s owed and what’s due.
Sales. The Sales account is where you track all incoming revenue from what
you sell. Recording sales in a timely and accurate manner is critical to knowing
where your business stands.
Purchases. The Purchases Account is where you track any raw materials or
finished goods that you buy for your business. It’s a key component of
calculating “Cost of Goods Sold” (COGS), which you subtract from Sales to find
your company’s gross profit.
Payroll Expenses. This is the biggest cost of all for many businesses. No
matter how much you beg, few people want to work for nothing. Keeping this
account accurate and up to date is essential for meeting tax and other
government reporting requirements. Shirking those responsibilities will put
you in serious hot water.
Owners’ Equity. This account has a nice ring to it. Basically, it tracks the
amount each owner puts into the business. “Many small businesses are owned
by one person or a group of partners; they’re not incorporated, so no stock
shares exist to divide up ownership,” says Epstein. “Instead, money put into
the business is tracked in Capital accounts, and any money taken out appears
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Business Records

in Drawing accounts. In order to be fair to all owners, your books must

carefully record all Owners’ Equity accounts.
Retained Earnings. The Retained Earnings account tracks any of your
company’s profits that are reinvested in the business and are not paid out to
the owners. Retained earnings are cumulative, which means they appear as a
running total of money that has been retained since the company started.
Managing this account doesn’t take a lot of time and is important to investors
and lenders who want to track how well the company has done over time.
Many business owners think of bookkeeping as an unwelcome chore. But if
you understand and make effective use of the data your bookkeeper collects,
bookkeeping can be your best buddy, helping you run your business more
effectively.
Glossary
Bookkeeping: The activity or occupation of keeping records of the financial
affairs of a business.
Business record: A document (hard copy or digital) that records a business
dealing.
Equity: A stock or any other security representing an ownership interest.

References
1. Record Keeping;
http://www.oerafrica.org/FTPFolder/Agshare/Agribusiness/print/Mod
ule%203/M3L4_RecordKeeping.pdf; June 5, 2017
2. The Duties & Responsibilities of Bookkeepers;
http://work.chron.com/duties-responsibilities-bookkeepers-8706.html;
June 5, 2017
3. Business record; https://en.wikipedia.org/wiki/Business_record; June 5,
2017
4. The 10 Bookkeeping Basics You Can’t Ignore;
https://www.score.org/resource/10-bookkeeping-basics-you-
can%E2%80%99t-ignore; June 5, 2017

Online Instructional Video:

1. The Basics of Small Business Record Keeping;
https://www.youtube.com/watch?v=Sro0dEuwekQ; June 5, 2017

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