The reconciliation changes with the way money arrives.

The chart of accounts is not the interesting part. The interesting part is the statement that can disagree with it: a letting agent, a merchant payout, a CIS deduction, a till. These are the patterns we set the file up for. They are not case studies of named clients, and they are not a promise that your file looks like this.

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Limited companies

The monthly file has to survive an accountant at year end. That means a director loan that has been posted as it happened, VAT that ties, inter-account transfers removed from turnover, and dividends recorded only when you confirm they were declared.

We do not prepare statutory accounts, a corporation tax computation, or a confirmation statement. We hand over a trial balance that agrees to the bank. If there are two companies and costs are paid by the wrong one, those costs are recharged or moved on your instruction, and the pair of entries is shown. We do not net the companies off into one set of books.

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Sole traders

The usual problem is a single current account that pays for both the business and the household. Every line is still coded. Business costs stay in the profit. Everything else is drawings. The drawings total is not a shameful figure; it is the figure that stops the profit being fiction.

Where Making Tax Digital for Income Tax applies, those coded transactions are the digital records the quarterly update is drawn from. We still do not send the update. Capital items — a van, a machine — are recorded as assets only when you and your adviser have said the item is capital. We do not run the annual investment allowance calculation.

Landlords

Income is the rent due or the rent received, on the basis your adviser sets, applied consistently. Agent statements are reconciled line by line: rent, management fee, maintenance they paid, and the net amount that reached the bank. Coding the net receipt as rent understates both income and costs.

Mortgage payments are split between interest and capital from the lender’s statement. We do not decide how much interest is allowable against property income. A portfolio is kept property by property, because a repair on one house is not a cost of another, and because the digital record is expected to identify the property. Deposits held by a scheme are not your income.

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Trades and the Construction Industry Scheme

Materials, subcontractors and tools should not share a nominal if you need to see labour. Where the Construction Industry Scheme applies, we record gross, deduction and net from the vouchers and statements you provide. The deduction is a balance-sheet amount until your adviser tells us how it has been set against PAYE or claimed. We do not advise whether a particular job is inside the scheme, and we do not operate the scheme for you.

Deposits taken for a job and invoices raised later are matched, so turnover is not counted twice. Van costs paid from a personal card are still captured, with the document, rather than omitted because they missed the business bank.

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Shops, cafes and hospitality

Takings are a daily or weekly summary from the till, split by VAT rate where the till can split them, agreed in total to the card payouts and the cash banked. Cash that never reaches the bank is still income, and the cash paid out of the tin is still a cost or drawings. We need the summary. We cannot reconstruct a week from memory at the close.

Tips, service charges and payouts to staff follow the treatment your adviser confirms, and that treatment is written on the rule for the nominal so it does not change quietly in August. Supplier deliveries are bills, not just the direct debit that left the bank three weeks later.

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Online sales and marketplaces

The marketplace payout is the dangerous number, because it feels like sales and it is not. Fees, refunds, advertising charged by the platform, and reserves have to come out of the gross. Where a platform reports VAT on your behalf, we record that report as the source and we do not also charge VAT again inside your own invoices. The clearing account is reconciled to what the platform still holds.

Stock is counted when you count it. We do not invent a stock figure to smooth the margin. If you do not count stock, the pack says the profit is before any stock movement, so nobody mistakes it for a gross margin.

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Practices, agencies and retainers

Income is often invoiced in advance or collected by subscription. The sales ledger has to show who has paid for work not yet done, and the bank has to agree to those invoices. We keep deferred income as a balance-sheet account when you invoice ahead and your adviser wants the income released over the months of the work. We do not release it on a hunch.

Subcontractors who invoice you are purchase-ledger items. People who are on your payroll are not also coded as suppliers. Mixing the two is how the same person is counted twice, and how a PAYE liability goes missing.

If you do not see yourself

Charities, groups with fund accounting, and businesses with a regulated client-money account need a file we should design on purpose, not by forcing them into the patterns above. Say so when you write. We would rather decline a scope than stretch a trading ledger over a trust account.

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