Contrasts between formal & informal bookkeeping
systems:
Formal bookkeeping Informal bookkeeping
Capital Either provided by the Owner is the only one
owner or obtained investing capital. Will
from investors or make a personal loan
shareholders or lend money from
friends/family as start-
up capital
Drawings Some formal Owner will draw
businesses won’t allow money whenever
the owner to take he/she needs it to pay
drawings for personal expenses
Fixed assets These items are of Are often purchased
value to the business as once-off expenses
& will be depreciated & will carry no value
over the lifespan of to the business
the asset
Stock Is as asset in the Will be purchased&
books of the business. treated as a payment
Are controlled & of cash or an expense.
accurate records are Is safeguarded &
kept of stock bought & informal record might
sold be kept of stock
bought & sold
Banking account Business will have its Banking account will
own banking account be in the name of the
in the name of the owner. Business entity
business business concept doesn’t apply
entity concept here
Credit Business will buy & Most transactions are
sell on credit. Debtors cash transactions.
will be administrated There could be a “tab”
&monitored & controls system where credit
are rigorous sales are informally
written up in a
notebook
Income Sales will be Income will be
monitored through informally written up
money received into in a notebook or
systems:
Formal bookkeeping Informal bookkeeping
Capital Either provided by the Owner is the only one
owner or obtained investing capital. Will
from investors or make a personal loan
shareholders or lend money from
friends/family as start-
up capital
Drawings Some formal Owner will draw
businesses won’t allow money whenever
the owner to take he/she needs it to pay
drawings for personal expenses
Fixed assets These items are of Are often purchased
value to the business as once-off expenses
& will be depreciated & will carry no value
over the lifespan of to the business
the asset
Stock Is as asset in the Will be purchased&
books of the business. treated as a payment
Are controlled & of cash or an expense.
accurate records are Is safeguarded &
kept of stock bought & informal record might
sold be kept of stock
bought & sold
Banking account Business will have its Banking account will
own banking account be in the name of the
in the name of the owner. Business entity
business business concept doesn’t apply
entity concept here
Credit Business will buy & Most transactions are
sell on credit. Debtors cash transactions.
will be administrated There could be a “tab”
&monitored & controls system where credit
are rigorous sales are informally
written up in a
notebook
Income Sales will be Income will be
monitored through informally written up
money received into in a notebook or
