Guide how to do simple bookkeeping
This is a guide how to do simple bookkeeping for sole-traders, self-employed, start-ups and micro businesses in Ireland, which are not registered for VAT.
We have created handy template which will save you time with bookkeeping. But you can follow this guide without buying our template, just follow those basics how to prepare your sales, expenses and profit and loss account. This basic bookkeeping will help you to prepare your tax return in the end.
5 steps to prepare your bookkeeping yourself
1. Step – Business information
Input all the basic information about your business. This information is used in other tables in the spreadsheet.
2. Step – Income/Sales
Take all your income invoices/receipts and sort them into date order. Then take the first invoice and start to fill in sales table with the date, amount and client name. Take next invoice and fill in next row the same way as the first invoice. Continue with all invoices you have for that year.
At the bottom of the table is total cell. There is a formula which will calculate amount of all invoices recorded. That number is your total gross sales for a year.
How to insert more rows
Table is set up for 30 invoices. If you need more rows, then highlight row where you want to add a new row in the table with pressing left mouse button. Once highlighted, press right mouse button and from the menu choose Insert row and a blank row will be inserted in the table.
3. Step – Expenses
Take all your expense’s invoices and receipts. If you have many receipts for example for petrol, you can have them separately on a sheet and sort them in date order. Then to record them use Step 3 – Expense per category table and on top in Description of expenses cell, choose Motor and Travel. If you have really many of them, you can group them per month and put each month separately. On top of the page is Month cell and you can fill there relevant month, for example June etc. Then take the first petrol receipt and fill in first row with Date and Amount. Once you are finished with page, don’t forget to take total number and input it in Step 3 – Expenses table. For example you had total 530 expense for petrol receipts for January 2021, so in Step – 3 Expenses table fill in next available row and record: Date: 31/1/2021, Amount: 530, Business use in %: 100%, Type of Expenses: Motor and Travel, Note/Purpose: petrol for January 2021. The reason why you are doing this extra input is that table in Step 5 – Profit and Loss is taking records from Step 3 – Expenses. The table Step 3 – Expenses per Category is only working table if you have many-many receipts of the same category.
If you have many different type of expenses you don’t need to sort them in categories and just sort them in date order and start to record them with Date and Amount in Step 3 – Expenses table. In Note cells you can write details for what is that receipts for (a purpose of buying goods or services), for example stationary, tools, courier cost etc.
Business use in %
If the cost was partly used privately for example telephone cost, input how much of the cost was used for business in percentage range 1% – 100%. For example one half of the telephone cost is 50%. If it is purely business cost, input there 100%. Then in Business Use Total cell is a formula which will calculate business amount based on the business percentage you filled in.
Take the next invoice and record it in the next row the same way, you recorded the first invoice. Continue with all invoices you have for that year.
At the bottom of the table is a Total cell. There is a formula which will calculate amount of all invoices recorded. The Business Use Total Total number is your total expenses for a year.
4. Step – Capital Allowances
When you purchase assets (like van, machine, laptop, phone, equipment etc.) you can not claim that expense in full in your income tax return. Assets are items which you use over the long-term to help you to generate income. That’s why you need to apportion purchase price over the period of time. Standard capital allowances in Ireland is 12.5% of asset purchase price (plant and machinery), it means that purchase price expense is deducted over the 8 years time. For example for a van which you purchased for €30,000 you can reduce your income by €3,750 value of capital allowances and you will reduce it with this amount following 8 years.
Input each item into separate row and calculate your capital allowances for tax year.
An example in the picture below:
John have an old van, which he bought in 2016. He paid for the van €6,000 and he uses van purely for business, so he input there 100% Business use. Business use value is full amount €6,000. The rate for calculating capital allowances is 12.5% of the business use value (€750 for each year) and this rate was used for capital allowances for previous years (2016 = €750, 2017 = €750, 2018 = €750, 2019 = €750, total: €750 x 4 years = €3,000. The opening value balance for 2020 is €6,000 (purchase price) – €3,000 (capital allowances for 2016 – 2019) = €3,000. John input €3,000 into Opening Balance cell.
In 2020 he decided to trade in the old van and buy a new van. He traded the old van for €800 (John got discount €800 from the price of the new van). John recorded the discount €800 as a sale price for the old one in the Sale of asset cell. The value of the van in John’s bookkeeping was €3,000 (Opening Balance) – €800 (Sale price) = €2,200. Because John sold the old van, he doesn’t have this van anymore, so the value €2,200 is actually cost for John. He sold the old van for less price that was its value in John’s bookkeeping. The value of €2,200 is cost for John, that’s why is input as write of the rest of Capital allowances. Closing balance of the old van is nill value.
The purchase price without discount for the new van was €28,000. A trader then applied discount €800 from the purchase price and John paid €27,200 by BACS transfer. John recorded the new van into next row as follows: Value is full purchase price €28,000. Van is purely for business use, so John input 100% value into Business use cell. Rate for calculating capital allowances is standard 12.5%, which is €3,500. Opening balance is the same as business use value, because the van was bought in 2020 and John is calculating capital allowances for 2020. Capital allowances is €3,500 and is calculated automatically, because there is formula in the table. And Closing balance is €28,000 (Opening balance value) – €3,500 (Capital allowances value) = €24,500. The Closing balance value of €24,500 will be Opening balance value when John will be calculating his capital allowances for 2021.
In 2020 John bought a new cell phone for €790. He uses the phone mainly for business, but sometimes he is doing private calls as well. So he checked his detailed phone bill and found out that 80% of his calls is for business purpose. John input 80% into Business use value. Business use value is reduced by 20%
5. Step – Profit and Loss Account
Most information in Profit and Loss Account table pop up automatically from previous tables. You only need to fill in section in the bottom of the page, Prepared by. Don’t forget to sign off, if it is for bank, social welfare or other institution.