GlossaryGeneral
What is bookkeeping?
Keeping a company’s income and expense records throughout the year
Short answer
Bookkeeping is the regular recording, throughout the year, of a company’s income and expenses, bank transactions and invoices and receipts. The official returns and annual accounts filed at year end are built on these records.
Explained
In the US the IRS accepts any recordkeeping system as long as it clearly shows income and expenses. Records are generally kept for 3 years, longer in some cases. A single-member LLC wholly owned by a foreign person must keep permanent books and records under the Form 5472 rules.
In the UK companies must keep accounting and company records for at least 6 years; failing to keep them can lead to an HMRC fine or a director being disqualified. VAT-registered companies keep some records digitally under Making Tax Digital.
Good to know
- A separate business bank account makes it easier to keep company and personal spending apart.
- Bookkeeping and accounting are different: bookkeeping is the monthly recording during the year; accounting is preparing the official returns and accounts at year end.
Official sources
- IRS — What kind of records should I keep
- IRS — How long should I keep records?
- GOV.UK — Running a limited company: company and accounting records
Verified on:
This page is general information, not legal or tax advice. Rules change; check the official source for the latest position or talk to us.
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