When you venture to form your own business, it may be tough initially as there is a lot that you will need to take care of on your own and this can be hard. However, do not lose hope as you will soon get the hang of it.

The first thing that is a must is being aware of the profits your company is making as well as keeping tabs on where you are incurring unnecessary losses. A good business will always have a well-organized system of their accounts in place.

How to do your accounts?

Your accounts should be arranged in such a manner that they take into account the income as well as expenses from your business for a particular duration. To facilitate ease of the job, you can prepare your accounts either on the basis of accruals or on a cash basis.

• The Accruals Basis – This covers income as well as expenditures that the business has incurred over a fixed period, irrespective of whether they are paid or not. This is the most commonly used method of accounting.

• The Cash Basis – This method sometimes seems more apt as it takes into account only the income that is received and the expenses that have been paid during that accounting period.

The simplest way of putting a system in place is by fixing a date, each year that serves as the day you do your accounting.

Working out taxable profits

Once you have your profits and losses in order, the next step is to work out your taxable profits. The best way to do this is by going through your accounts and making tax adjustments to your capital allowances as well as for business expenses that are not allowed. The next step is to figure out in which year the profits that are seen in your accounts can come under taxation.

This decision is usually made on the basis of the period in which you will be charged tax in a particular tax year. This is called the basis period. This is usually a 12-month period that ends in the given tax year.

So, make sure you are capable of working out your taxable profits for your business to have a smooth sailing.