doing your accounting, for dummies.

[keaton]

I'm planning on opening my own small business in the future, while I intend to use a accountant I believe it does not hurt if I understand the basics myself.

I plan on making my own handmade items, working from home and selling online. So profits would be those things I sell, expenses would be -

Materiels
Ebay & PayPal fee's
Postage
Packaging

I would work alone, not need transport and will be a sole trader. As I understand, to do my self assessment I add up all my sales, subtract the expenses, add in the unsold stock and then the amount is taxable for example-

Sales-100.00
Expenses- 25.00
End of year stock not yet sold- 10.00
=85.00 taxable.

I've done a simple version but is that pretty much it? I've read about assets and such, but I don't want to add the few tools I own to make the stuff into the equation as it just makes it that bit more complicated.

[robbob]

Hello Keaton

You are pretty much on the money so far.
With regard to assets anything that is retained by the business and will last more than a year or two chuck into a separate listing, you have a bit of flexibility with regard to claims in relation to asset additions (particularly if you have a profit year one that results in unused personal allowance for the year).
Feel free to include assets like tools printers computers previously owned personally at their market value.

Main thing is to log everything in / out as you go that relates to the business or partly relates to business (eg mobile phone car etc) and then you can worry about year end adjustments at a later date - i am presuming you will start as sole trader. With regard to car it is best practice to list business mileage (with details) and record total mileage of car so exact business miles and business/private splits are known.

If you are using ebay and paypal invest the time and effort so that the info extracted is complete and adds up fully - ideally keep complete summary spreadsheet showing gross sales / ebay fees / paypal fes / refunds / paypal expenses paid / deposits and withdrawals. It probably won't matter too much at low levels but when the business takes off the accountant will be have late night uncontrolable sobs if they have to go through 2,500 transactions trying to code them all out as approrpiate on your behalf.

PS good luck with the new venture - i always fancied giving up the day job and selling good quality socks on ebay - after i heard someone was earning 50k per year doing that.

[keaton]

Thank you for the really helpful reply, its nice to know I'm pretty much on the right track.

50k selling socks, maybe I need to look at sock wholesalers lol.

[King_Maker]

Here is a link to HMRC's technical Note on Simpler Income Tax for small business :

http://www.hmrc.gov.uk/budget-updates/m ... h-note.pdf