As a sole proprietorship, you have a number of accounting obligations; these obligations include:
- A financial diary: more on that in this article
- A purchase journal: all invoices and credit notes from suppliers
- A sales journal: all sales invoices and credit notes to customers
- An inventory journal: the value & details of your inventory, if you have to keep a stock, of course.
Let’s start by defining the word “financial diary”! A financial diary is really nothing more than an overview of all your financial transactions as a self-employed person. For a sole proprietorship, that record of all your financial transactions consists of all the bank statements from your professional account on the one hand and a cash book on the other.
Tip!
A cash book is quite specific, which is why we explain it in a separate article.
So the financial diary in a sole proprietorship is an umbrella term for the bank statements of your professional account on the one hand and the cash book on the other. Therefore, if you do not have to keep a cash book, your financial diary consists only of the bank statements of your professional account.
Financial diary: bank statements 📃
As long as you do business through a sole proprietorship and thus have to do single-entry accounting, you only need to keep your bank statements, nothing more! So you don’t have to incorporate the bank statements into your accounts through an accounting program, just keeping them (through your bank’s application, for example) is sufficient.
This is why we talk about single-entry and not double-entry bookkeeping. In single-entry accounting it is enough to keep everything, as far as it is applicable to your business of course, think of a purchase journal, sales journal, financial diary & inventory journal. But no connection needs to be made between those different documents.
In double-entry bookkeeping (as is required for corporations), you have to keep all the bank statements, on the one hand, and link them to purchases and sales, on the other. More broadly, you have to make the connections in your accounting program between the different documents (purchase journal, sales journal, financial diary & inventory journal). To do this, you must process the bank statements in accounting software so that you can link them to the corresponding documents. So the whole financial flow is double, in addition to processing all your purchases and sales, hence “double-entry accounting”.
Tip!
Back to single-entry bookkeeping with an important tip for saving bank statements from your professional account! (see below)
A tax audit may cover accounting records from several years ago. It could be perfectly possible that, over time, certain bank statements are no longer available in your bank’s application. It is best to download the PDF version of an entire year’s worth of bank statements after each year and store them somewhere yourself. This way you can be sure that you will always have access to them and will not have to pay additional fees to your bank in order to view “old” bank statements.
Dexxter & sole proprietorships 💪
Dexxter focuses 100% on sole proprietorships with single-entry accounting. If you would like to know more about the different forms of enterprise, you can find more information in the link.
This is why we do not offer in Dexxter the possibility to process your bank statements. That would make the entire accounting of your sole proprietorship considerably more complex (and expensive), while it is not required by law at all!
Dexxter does allow you to keep track of which of your sales and purchase invoices have already been paid. You can easily indicate a payment status for each document so that you know, for example, which of your customers still have to pay.
Conclusion
A financial diary consists of the financial transactions (bank statements) on the one hand and a cash book on the other.
As long as you do single-entry accounting, you don’t need to connect the bank statements to all your documents. Just keeping the bank statements is enough to be legally compliant. So if you have a file of your bank statements available somewhere, such as through your bank’s application, that is sufficient.
