Recording accounting transactions: a simple guide for South African small businesses
Recording accounting transactions means writing down every sale, purchase, payment and receipt in your books, with proof, so your figures and your tax returns are right. It is the base that every other financial decision sits on.
In short
- Every transaction needs three things: a source document, a date and an account. If any is missing, the entry cannot be trusted.
- Each transaction is recorded twice, as a debit in one account and a credit in another. This is double-entry bookkeeping.
- Reconcile your bank account to your books at least monthly. It is the fastest way to catch errors and fraud.
- Keep tax records for five years. Companies must keep their records for seven years.
What you record, and the proof you keep
A transaction is anything that changes what your business owns or owes. The proof is called a source document.
| Transaction | Source document |
|---|---|
| Sale | Tax invoice or till slip |
| Purchase | Supplier invoice |
| Payment or receipt | Bank statement line, plus the invoice it settles |
| Wages | Payslip |
| Cash expense | Slip or receipt |
Keep the document, the date and what it was for. A payment with no proof is a problem at tax time, because SARS can disallow a deduction you cannot support.
Two entries for every transaction
In double-entry bookkeeping, every transaction touches two accounts. One is debited and the other credited, and the two amounts are equal. If you are not sure how debits and credits work, read our guide to debits and credits.
A sale of R11,500 including 15% VAT, paid into the bank
| Account | Debit | Credit |
|---|---|---|
| Bank | R11,500 | |
| Sales | R10,000 | |
| VAT output | R1,500 |
A stock purchase of R5,750 including VAT, paid from the bank (VAT-registered)
| Account | Debit | Credit |
|---|---|---|
| Stock purchases | R5,000 | |
| VAT input | R750 | |
| Bank | R5,750 |
If you are not registered for VAT, there is no VAT account. The full R5,750 is the cost.
A routine that works
- Capture as you go. Record or scan documents weekly, not at year end.
- Categorise consistently. Use one chart of accounts, a list of the account names you use, and do not invent new ones for each expense.
- Reconcile the bank monthly. Match every line on the statement to your books and explain any difference.
- Reconcile VAT and payroll to your returns before you submit them.
- Review a monthly summary. Sales, costs and cash. Look for anything that surprises you.
How long to keep records
SARS requires tax records to be kept for five years from the date you submit the return they relate to. Companies must keep their company records for seven years. Electronic records are accepted, as long as they are complete and can be produced when asked.
Mistakes that break the books
- Mixing personal and business spending in one account.
- Recording cash sales at year end instead of when they happen.
- Recording VAT as income, or forgetting to record it.
- Leaving the bank unreconciled for months.
- Losing slips, so a real expense cannot be claimed.
What to do now
- Open a business bank account if you do not have one, and stop paying personal costs from it.
- Choose a system. Cloud accounting software makes capture and bank feeds simple.
- Set a weekly hour for capture and a monthly slot for reconciliation.
- Back up your documents in a place you can reach for at least five years.
- Ask for a review. A bookkeeper can check your set-up in a few hours and fix it before it costs you.
Frequently asked questions
Do I need accounting software?
Not by law, but by year two it usually saves more time than it costs. It also makes VAT and payroll easier to reconcile.
Can I keep records on paper?
Yes, but electronic copies are safer, and records must be complete and accessible on request.
What if I have missed several months?
Catch up in date order, starting with the bank statements. A bookkeeper can usually clear a backlog faster than you expect.
Sources and further reading
- Tax Administration Act 28 of 2011, sections 29 and 30 (record-keeping), Government of South Africa
- Companies Act 71 of 2008, section 24 (company records), Government of South Africa
- Value-Added Tax, South African Revenue Service
This article is general information for South African businesses. It is not tax, legal or financial advice, and it reflects the rules and figures at the date shown above. Tax rules change, so confirm the current position before you act. TBL's practitioners are registered tax practitioners.