What accounting records must a small business keep in South Africa?

Small businesses must keep records of all income, expenses, assets, liabilities, and equity. This includes invoices, receipts, bank statements, contracts, and VAT records. SARS requires these records to be kept for at least 5 years.

Do I need an accountant for my small business?

Not necessarily. Many small businesses manage their own bookkeeping using accounting software like LEDGA. However, you may want a tax practitioner for annual tax returns or complex tax matters.

What is the difference between bookkeeping and accounting?

Bookkeeping is the daily recording of financial transactions (income, expenses). Accounting involves analyzing, interpreting, and reporting financial data, including preparing financial statements and tax returns.

Small Business Accounting Basics: South African Guide

Accounting is the process of recording, organizing, and understanding your business finances. Good accounting helps you make informed decisions, stay tax compliant, and grow your business.

Why Accounting Matters

Know your profitability - Are you actually making money?

Tax compliance - Avoid SARS penalties

Better decisions - Data-driven business choices

Secure funding - Banks need financial records

Track growth - Measure progress over time

The 5 Basic Accounting Concepts

1. Revenue (Income)

Money your business earns from selling products or services.

Sales revenue

Service fees

Interest income

2. Expenses

Costs of running your business.

Rent and utilities

Salaries and wages

Materials and supplies

Marketing costs

3. Assets

What your business owns.

Cash in bank

Equipment

Inventory

Accounts receivable (money owed to you)

4. Liabilities

What your business owes.

Loans

Accounts payable (money you owe)

VAT payable

5. Equity

The owner's stake in the business.

Capital invested

Retained earnings (profits kept in business)

The Accounting Equation

Assets = Liabilities + Equity

This must always balance. Every transaction affects at least two accounts.

Essential Financial Statements

1. Income Statement (Profit & Loss)

Shows profitability over a period.

Revenue - Expenses = Net Profit/Loss

2. Balance Sheet

Shows financial position at a point in time.

Lists assets, liabilities, and equity

3. Cash Flow Statement

Shows cash movements.

Operating, investing, and financing activities

Setting Up Your Books

Choose Your Method:

Cash basis: Record when money changes hands (simpler)

Accrual basis: Record when transactions occur (more accurate)

Create a Chart of Accounts:

Organize accounts into categories:

Assets (1000-1999)

Liabilities (2000-2999)

Equity (3000-3999)

Revenue (4000-4999)

Expenses (5000-5999)

Daily/Weekly Tasks

Record all sales and income

Log all expenses with receipts

Reconcile bank accounts

Follow up on unpaid invoices

Monthly Tasks

Review income statement

Check cash flow

Submit VAT return (if applicable)

Reconcile all accounts

Annual Tasks

Prepare annual financial statements

Submit income tax return

Review business performance

Plan for next year

How LEDGA Simplifies Accounting

LEDGA handles the complexity so you can focus on your business:

Automatic categorization of income and expenses

Real-time financial reports at your fingertips

VAT calculations done automatically

Bank feed integration for easy reconciliation

SARS-ready reports when tax time comes

Small Business Accounting Basics: A South African Beginner's Guide