The bookkeeping reports

Every time a bookkeeping exercise is done we generate a number of reports. Amongst other things, the reports will tell you how much profit you are making, how much your tax reserve should be, and how much your customers still owe you. Dates are shown in scientific notation YYYYMMDD so that when you view a folder, files are listed first by document type and then by date.

The reports usually relate to one quarter in isolation, and this is what we normally prepare:

– 300330 VAT return
– 300335 VAT acknowledgement
– 488120 ledgers’ report
– 488160 interim balance sheet
– 488220 aged debtors
– 488240 interim profit and loss account

If you’re not VAT registered then ignore the fact that there are no 300330 and 300335 reports.

The 300330 report – A software version of the HMRC VAT return

The figures on this report are prepared in accordance with MTD for VAT and are submitted from our software directly to the HMRC mainframe. This copy of the VAT return is now the only version which is available under MTD for VAT.

The 300335 report – A software version of the HMRC submission receipt

This is the only proof you have that the VAT return was submitted.

The 488120 report – a full list of which transactions go into which ledgers

The general ledger is prepared the way that accountants and bookkeepers like to do it. The ledgers’ report lists every single transaction . . . twice. If you like double entry bookkeeping then this is the report that will show you how everything is recorded.

What you should be especially interested in are the sections of this reports that list the Debtors and the Creditors. These sections set out (on a case by case basis) who owes your business money, and who is owed money by your business.

Most importantly, if you’re a director of a limited company, then you will probably feature in this report as a Creditor. Look for a sub heading like:

Creditors: 1111111111 Your Name

It will be much nearer to the end of the ledgers’ report than the beginning. Generally, the Creditor ledger in your name shows how much you have taken out of your business. We try to keep the balance on that account as close to NIL as possible.

The report is presented from the company’s perspective. So if your Creditor balance is Black, you may owe the company money. The Company is “in the black” and that’s good from the point of view of the company. The problem is that it’s not good for you and (unless corrected with a dividend, then) you have an interest free loan from your company. HMRC does not like directors having interest free loans. When that happens they may charge you extra income tax on a benefit in kind.

If your Creditor balance is Red then that’s good for you (and not for the company) as the company owes you money.

Moreover, if our records do not wholly agree to your records, this 488120 report will help you establish any differences. Amendments to our records involve double entry bookkeeping, so if you want something changed you will need to tell us which two entries in the 488120 report are wrong and which two entries you were expecting to see. That could mean four bits of information for each amendment.

The 488160 report – an interim balance sheet – a snapshot of the business on that single day.

The balance sheet tells you where you stand with all of your various stakeholders, and it tells you what the business might be worth on the open market.

Fixed Assets – the value of the assets owned by the business (after allowing for depreciation). These items tend to be the major bits of plant and machinery. Normally, computers are not recorded here on the balance sheet, unless they are particularly hefty pieces of kit. Computers tend to appear under “equipment expensed” in the profit and loss account.

Other Debtors – For example a VAT refund, or SMP funding which HMRC sometimes pays to companies.

Customers – How much your customers owe you. If this figure is negative it will be in brackets and that means that your customers may have overpaid you.

Suppliers – How much you owe your suppliers. Negative figures (in brackets) mean that you owe them. Positive figures mean that they owe you.

Other Creditors – People you owe, like HMRC (for corporation tax) and the VAT office. This list of “Other Creditors” can include directors and employees who may be owed some money for expense claims. If any director has a positive figure by their name then they actually owe the business some money. Also, pay particular attention to the Corporation tax figures and due dates.

Total Funds – The Balance Sheet Value – the net worth of the company. If this is negative (if it’s in brackets) then technically you are insolvent. It is illegal to continue trading if you are insolvent. Talk to us because a short term deficit may be tolerated, but a persistent deficit needs remedial attention. If the Balance Sheet Value is positive, then this is the combined value of all the shares, and it’s the amount you (along with and all the other shareholders) might expect to receive if you sold the business on the open market. Don’t get too excited. If this figure is less than one million, it’s unlikely that anybody will be interested in buying you out!

The 488220 report – a list of aged debtors – customers who have not paid you

The oldest unpaid invoices are on the right. You should chase these customers and collect these overdue payments.

If there are entries in red under “unallocated creditors” then the records are showing that you have been paid by a customer, but either you have not invoiced that customer or there is a mismatch in invoicing and amounts received. Whether it’s an overpayment by them, or a missing invoice in your system, you need to correct the mismatch before the end of the following quarter.

Do not ignore aged debtors – they owe you money! If your records show that the old amounts have actually been paid before the end of the quarter date, then you need to let us know how and when the payment came in, because we didn’t see it arrive in your company!

The 488240 report – an interim profit and loss account for the year so far

The first set of columns gives the figures for This Quarter. That is normally a three month period which fits in with the VAT quarters.

The second set of columns shows the whole trading Year To Date. That’s provided so that you can asses the activity in the current quarter and see if it is in character with all the data we have since day one of this trading year.

The Expense categories are the ones that we know about. It’s worth having a proper look at these in case something obvious is missing, or in case expenses are being categorised incorrectly.

A forecast of the Corporation Tax due. You should keep a tax reserve to one side so that you’re ready and have enough funds on the due date. Corporation tax does not appear on self employed accounts, because income tax for the self employed depends on many factors and not trading profit alone.

The bottom line – this is your Net Profit or loss.

VAT Payments

VAT is normally due within one calendar month of the VAT quarter.

Even though the quoted date may be 7 days later than the month end, it still makes sense to think of the payment as being due at “the end of the following month”. The reason for this 7 day grace period is that HMRC’s bank does not operate the “faster payments service” and it can take up to 7 days for your payment to reach them!

Please make the payment to the “VAT Controller” in good time, based on our quarterly email. The 300330 report which we prepare also shows this figure at line 5

Your bank may list the VAT controller under HMRC or under VAT. It may also show either the SHIPLEY address or the old SOUTHEND address. If the online banking facility is not clear, then you should specify these details:

• sort code 08-32-00
• account no. 11963155
• ref – your VAT number

The other way to pay is to set up a direct debit, so that they can simply take the money off you when they like. Debits are normally taken one month and 11 days after the end of the VAT quarter. Be sure to have funds available in your account by the 11th of the relevant month.

Approval of Formal Accounts

In the old days traditional paper accounts were sent out by post, for approval and signature. Nowadays, HM Revenue & Customs will accept authorisation electronically and that speeds things up. That means that we now prepare PDF files and email instructions for clients:

  • 4xx600 full accounts
  • 4xx610 abbreviated accounts (Limited Companies only)
  • 4xx660 letter of representation
  • 4xx770 tax computation (adjusted profit for tax purposes)
  • 6xx700 corporation tax return (Limited Companies only)

Please check the PDF files you receive, because they are based on the records that you provided. By responding with the relevant “approved” message you are signifying that you are in agreement with all the reports that have just been sent for approval.

The formal process of preparing accounts for all businesses, no matter how small, ensures that no steps are overlooked. That way, when self assessment tax returns are finalised, we can be sure that we have each and every business recorded correctly.

We have one or two legacy cases still, and any paper documents which you sent to us are batched up at this stage and are returned to you by regular post. These need to be kept safe for a period of 6 years after the end of the trading period. If you have any queries on the accounts, then please let us know before the accounts are approved. Thank you.

Getting things right

The last thing we want to do is to disappoint our clients and that’s why we have systems and processes in place. However, there is an established saying in accounting circles which goes:

“The information you get out

is as good as

the information that you put in.”

That’s another way of saying “give us incomplete information, and you’ll get an incomplete answer”. Nobody wants to build a jigsaw puzzle with missing pieces or with the wrong pieces and if we give you an incomplete picture of what’s happening, you’re not going to be happy.

Our systems and processes are supposed to help prevent problems! It all starts with collecting the right information at the right time and we use simple checklists like this one to do just that:

We have to rely on the details that you give us, because it’s your business, and you are in control. Unlike some mythical accountants of old, we cannot “invent” things.

Of course, we all sometimes make mistakes, and we know that sometimes work does need to be redone. It’s our normal policy not to charge extra for reworking things when genuine mistakes have been made. However, if we find that we have to do things twice on a regular basis you will find that we will start charging you twice.

Let’s try getting things right, first time around!

The Cardboard Box Game

This is a team game about a cardboard box, imaginatively called:

“The Cardboard Box Game”

It may have been variously advertised as “The Mysterious Mystery Game”.








Attendees are divided into equal sized groups of around 5 to 10 people.

Each team has a small cardboard box containing some stationery. Teams are invited to share stationery if at all possible. The box is what Royal Mail calls a “small parcel mailing box” and it measures 35 x 25 x 16 centimetres.





This box is flammable!

Rule 0 – Do not be on fire!

A poster from HackSpace Nottingham which looks like a traffic sign. A person is running away from a fire, the border has a large red circle, with a large red diagonal line. Beneath the circle, in big bold capitals it says DO NOT BE ON FIRE. The poster is edged with black and yellow tape, commonly used to fence off danger.





Each team selects one advice slip from a hat. The slip contains a word or phrase.

The challenge is to develop a product, based on the word or phrase, and use the Cardboard Box as the prop. You are trying to sell your product. Either as some type of box, or where the box is a key feature of your offering.





You have 20 minutes to work on the project.

The box may be modified and/or decorated in order to support your story. One or two team members (a maximum of two) will give a 60 second presentation about the product. Keep it simple, just basic dialogue and/or role playing. No Powerpoint, etc!




The Rules

0. Do not be on fire.

1. The cardboard box must be the focal point of the presentation.

2. No Eiffel Towers or origami frogs. The cardboard box must remain clearly identifiable as a cardboard box.

3. The storyline for your product must remain faithful to the expression on the advice slip. The more amusing the better. Derivations on the theme, or the development of tangential ideas are permitted. For example, if your expression was “Outer Space”, then a project about “Star Wars” would be fine, along with a chunky “cardboard box version of R2D2”. There must always be a clear and obvious link between the expression and the product.

4. Presentations may not exceed 60 seconds.






Gained for Lost for
Artistic creation
Cardboard engineering skills
Coherent storyline
Imaginative team name
Boxes which do not resemble boxes
Deviation from the expression
The decision of the judges is final.

This document can be found at:





A fixed asset register

Claiming tax relief on the big things

All businesses can claim tax relief on business expenses. That can include items that you bought before the business started! Do you have a laptop, and any other IT kit? Is your office equipped with a desk, a chair and a book case? Here’s a typical list of things that you might be introducing. There may be things on this list that you should ignore, and there may be other special things (in your line of business) that we haven’t thought about.

All of these things are “the big things”, the sorts of things that will serve the business over a number of years, and not be used up all in one go. Use this list as a guide, and please compile your own. The descriptions under “model” and “serial number” should be sufficiently clear so that one Dell laptop can be distinguished from the next Dell laptop that you buy, if you see what we mean!

If you run a limited company you should avoid having a company car. Keep you car as a private asset. If you have a self employed trade and the car is a fundamental requirement, then include it in this list.

* make * * model * * serialno* * Date Acquired * * total cost *
Car 1
Car 2
Desktop 1
Desktop 2
Printer 1
Printer 2
Laptop 1
Laptop 2
Fax machine
Air con
Digital camera
Video camera
Desk 1
Chair 1
Filing cabinet 1
Book case 1
Desk 2
Chair 2
Filing cabinet 2
Book case 2
Other specialist equipment

Once your list has been prepared, please let us have a copy.

When do I have to charge VAT?

VAT is a complex area of law, and it revolves around a “person” as a legal entity and not a “business”. Generally, a “person” can be:

• an individual
• a limited company
• a partnership

If you are not VAT registered, then you cannot charge customers VAT. This earlier report discusses the question of registration.

Once registered, the VAT registration number is allocated to only one “person” and can be used by only that “person”. If you are both a self employed individual, and you are also running a limited company, the VAT number is not interchangeable. The question of registration has to be asked by each “person” and you may need (or want) to have separate VAT registrations for each separate entity.

Once a “person” is VAT registered, then ordinarily, all goods and services supplied by that “person” should carry VAT. There are very few exceptions to the VAT rule, and they are mainly relevant to any customers you have who reside outside the European Union.

So for example, if you are VAT registered and you’re a self employed individual who (a) does website design as your main trade and (b) offers guitar lessons as a sideline, then you are one and the same “person” in a legal sense. All of your business activities are “VATable” sales and all of your EU resident customers are liable to pay VAT – whether that’s for a web site or for a guitar lesson.

Conversely (for example), if you have a VAT registered company which offers management consultancy, and you also do a bit of “marketing” work as a sideline, in partnership with a friend, then the company and the partnership function as two totally separate entities. They cannot share a VAT number and any business done between the two entities should be done on a commercial basis and at “arm’s length”. The management consultancy fees from the company will charge VAT to the partnership, whereas the marketing fees from the partnership cannot.

If in doubt about who charges VAT to whom in any specific business relationship, simply establish which entity is the supplier and which entity is the customer. Which letterhead are you using to do the billing? If the position is still unclear, then it would be best to check with your accountant.

Claiming back expenses from your own Limited Company

You may be familiar with this process if you have ever been employed and had to submit an expense claim. As a director of your own limited company the process is the same, and it applies where directors and employees have used personal cash or a personal bank card to pay for a business cost.

It’s better to have all your suppliers invoice your company directly, and have the company pay them directly. If that could be done, you would never have to fill out a personal expense claim form.

Do not prepare employee expenses claims for items which the company has paid for directly from the company bank account or with the company credit card.

Keep the receipts for all of the things that you buy personally, on behalf of your business. Then once a month (or perhaps at some different interval) fill out a claim form and ask your company to reimburse you. If there is ever a records inspection by the tax office, they will want to see the claim forms with supporting receipts, and they will also check that the reimbursements on the company bank statements match the amounts claimed on the expense forms.

Motor expenses

Mileage on business journeys should be claimed at the HMRC approved rate. These have been the same since 6 Apr 2011.

• 45p per mile – first 10,000 miles per year
• 25p per mile – additional miles

No other motoring costs are to be claimed. The FPCS rates from HMRC are calculated by the AA so as to cover all the conceivable running costs of having a car! That means that you have to keep a log of all of your business journeys in your own car.

Foreign Currencies

Separate out any expense receipts which are in foreign currencies and prepare an individual claim form in each separate currency. That way the sub-totals do not end up with mixed currencies.

Non-VAT Registered Businesses

Use two forms, one form for mileage and just one form for all other business expenses. Separate the receipts by category and claim back the gross amount including VAT. Use the non-VAT form in the samples below, and just put all the figures on that.

VAT Registered Businesses

Separate your personal expense items according to whether they have VAT on them or not. VAT receipts for motor fuel belong in another separate pile. VAT on fuel can be reclaimed, but only to the extent that it is vouched for on actual VAT receipts.

Use three forms, one form for mileage and two separate forms covering expenses with VAT and expenses without VAT.  As a director/employee you are claiming back all of the gross amounts including all the VAT. The bookkeeper needs to know which items include VAT and which ones don’t. That’s why there are three different forms for a VAT registered business.

Book keeping and sample forms

If you are doing your own book keeping, use the totals in each column and post them into your software. Download these sample forms (MS Excel) if that helps:

• Mileage Claim
• Non-VAT Expenses
• VAT Expenses

Expenses in the first month or two

Normally a new business, will lead to cash expenses which you want to reclaim, before you have any funds to pay them. There are two ways to handle this dilemma.

• Wait until the business can afford to make the reimbursement.
• Introduce working capital (use a round sum) into the business, and then reimburse yourself!

Over the course of the financial year movements in capital introduced and capital withdrawn accumulate and may be shown in the annual accounts as a loan from the director to the company. Take care, because capital movements can sometimes work the other way. If you take too much capital out of the company, the loan is the other way around and there can be adverse tax consequences.

Recharging Costs to customers

Company’s do not claim from customers, they invoice.

Company’s are not reimbursed by customers, the customer pays the bill. Your company has a receipt in the bank account.

Reserve the expressions claim and reimburse for activities that occur between you (or your staff) and your company.

If your company recharges costs to a customer it is done on an invoice. The amounts recharged are usually liable to VAT. See the Disbursement or Expense report for more details of what may and may not be liable to VAT.

In a legal sense transactions between you and your company, and transactions between your company and your customers are entirely different obligations.

The terminology matters. This is one of the few situations where all accountants, bookkeepers and VAT officers need you to understand this concept fully.

Staff claim and staff are reimbursed.

Company’s do not claim from customers, they invoice.

Company’s are not reimbursed by customers, they have a receipt.

The mechanics of processing an expenses claim

It’s your business, and it’s up to you how you run it. We are just the accountants that do the bookkeeping, the VAT returns, the year end accounts and tax returns. We do not run your internal systems for you. Ordinarily we expect you and your staff to prepare your claims on a regular basis, not once per year, and definitely not one week before the Companies House accounts deadline. This is how we do it at Proactive, our staff can submit one claim per month, which is due in by the last day of the month and is then paid by the 14th of the following month. If they miss a month end deadline then they have to wait a further month for any claim to be accepted and reimbursed.

Your claims are subject to the approval of one of your internal staff who will scrutinise them with care. If approved, one of your internal staff will then implement a reimbursement, normally by bank transfer. Do not wait for the next VAT quarter to end, do not wait for Proactive to check things, it’s not our job to micro manage what you do. However, we do require copies of all personal expenses claims handled within your business. If our checks identify areas of concern we will discuss the problem and the remedies which are open to you.

Finally, if you are the only person in your business, you still have to follow this process. Imagine you are wearing two hats! And do this task with some rigour. Later, when your business is big and successful you will thank us for putting The Senior Manager Test on this web site.

Company Dissolution

Once you have decided that a company is no longer needed, it can easily be dissolved. You must first ensure that the accounts and corporation tax return for the final period of trading have been submitted and that any tax liability has been paid.

If there is a tax repayment for the final year, you will want to have received that before you close the bank account and dissolve the company. If a company still has money in a bank account on the date of dissolution, you will forfeit that money and it is sent to the government’s Solicitor General. It is a nightmare to get a company reinstated and then recover money from the Solicitor General. So we recommend that you complete your finances first and only then, dissolve your company.

Do not close the company bank account until your tax affairs are settled!

Do close the company bank account before the dissolution form goes in!

If Proactive has prepared the accounts and tax return for the final period of trading then we will be in position to work on the dissolution for you. This normally involves a fee which might be waived in the simplest of cases.

If you want to do this yourself and have an account with Companies House then you can start the process here:

The procedure has to allow for legal notices to be published in the London Gazette over a 2 or 3 month period. It normally takes around 3 to 4 months to have a company dissolved. Once the process has been started, no more forms should be sent to Companies House for this particular company, none whatsoever. If that happens, the dissolution process will be cancelled. You will need to start the whole thing again!

If you need further advice, please contact us.

Dealing with bad debts

Any business with a bad debt will naturally try to take steps to try to recover it. However, eventually you have to take a view on these things and perhaps write it off. If you go about this the right way you can claim bad debt relief and your tax bill may be reduced. And, if you’re VAT registered you can also claim back the VAT.

Go about it the wrong way and there is a risk that you will lose out even more. I’ve seen that happen and I’ve seen the VAT office recover VAT which was reclaimed in good faith, but which was reclaimed incorrectly.

Firstly, be commercial! Make an effort to recover the debt. Send reminders to the client, or to the administrator or to the receiver. Be persistent. If after 6 months you are getting nowhere, then you can consider bad debt relief. No tax relief will be allowed until 6 months after the invoice date.

Assuming that writing off the debt is your only option, you then have to generate a document (a copy of the original invoice will do) and mark it “Bad Debt”. This “expense” is then shown in your books as though you had bought something. It is not a negative invoice, nor is it a credit note, it is simply an expense and there is a special “bad debt” category for this type of expense.

Like any other expense, it goes through the books, leads to a reduced profit, and in turn to a reduced tax bill. And if there was VAT on the original document, then there is VAT relief on the corresponding bad debt. Treat it as you would any other expense from a VAT registered supplier.

Just be sure to try 6 times over 6 months to recover the debt. At the point where you write it off as a bad debt you must inform the client that you consider this to be a bad debt and, accordingly, you are claiming bad debt relief. That way, the tax man and the VAT man will be content that you have followed the rules.