Data Capturing,Transactional Allocations and Reporting

Data capturing is important in every business, not for future use only but for the end results.
We need to make sure that we understand how each transaction affect our books, as that will have an effect on our reporting.

1. Capital – at no point should money put into the business by the owner be counted as an income. The incorrect allocation of these funds will raise the tax liability, as the taxable income will include the revenue /sales amount. As much as Capital has an effect on our cash flow it should never be allocated under our income account. Capital affect the business balance sheet instead.

2. Loan (received) – same as capital, monies received as a results of borrowing should not be counted as an income. Especially Loans received from the bank. We need to bear in mind that a loan from financial institutions have an interests bearing. A loan is received in an exchange of assets such as cash, vehicle, property, etc. Thus the repayment of the loan must also not be allocated as an expense. Only the interests paid will go into our expense account.

3. Cash withdrawals – Though withdrawal of cash have a negative impact on our bank account, they also need to be reconciled according to their use. For example, if the owner withdraws cash paying for a small job done by a casual worker. The money paid needs to be allocated under the correct account. In this case ‘repairs and maintenance’. This will help us know the accurate value of maintenance done for a certain period.

4. Petty Cash – This is a small amount of cash that we keep in our premises for our small unexpected expenses. Petty cash also need to be reconciled according to the use of cash. To conclude accurate reports, our data entries need to be on par.

5. Purchases and Payments – we do not have such accounts in accounting. We need to investigate what exactly was the purchases for. For example, if it was for office supplies or consumables thus the transactions should be allocated as such. Payments as well – what was the nature of the payment? Query with the relevant person /department so we can allocate accordingly.

We encourage the owners to keep track of these transaction by noting them down as they occur. So much happens in a day, thus it is not going to be easy to remember transactions that happened 30+ days ago.

Let us operate with direction.

Compiled by Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd
A registered Accountant and Tax Practitioner.

Published by Matsobanemetja Business Consulting

Business to business service company that provides exceptional quality to its clients and maintains accurate & professional Bookkeeping, Accounting, Taxes, Consulting Services, Business Coaching & many more.

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