The guide to Startup Accounting

The guide to Startup Accounting

Startup Accountants in London have been providing a range of tailored accounting and taxation services to individuals as well as small and medium-sized businesses. It is a part of a well-recognized accounting firm in the UK. 

If you're planning to start a startup or you're already doing it, then this article will help you a lot in doing accounting and bookkeeping. 

Bookkeeping vs. Accounting

Both are numbers-related, but accounting and accounting are not exactly the same thing. Accounting is the process of tracking all financial records—mainly income and expenses. The term dates back to the old days when business owners tracked finances in paper books.

Accounting is the procedure of analyzing your financial records and then interpret it for everything from making sure you pay the right amount of tax, to making strategic business decisions based on your business numbers.

Accounting and accounting are vital to every business success, but as a startup, you may have an additional need to keep a good record. If you have investors, they're going to require you to provide financial reports. And if you're trying to get a business loan, you're going to need clear, easy-to-read financial resources so that potential investors can make informed decisions about investing in your vision.

If you're a brand-new startup, read this

You'll need to make a few decisions about the structure of your business before you can start accounting.

Choose an entity of a business

Your business entity determines how you are taxed, how you can pay for yourself, your potential business liability, and more.

The following five main types of business entities are:

  • Proprietary alone
  • Partnership Agreement
  • Corporation C
  • Corporation S
  • The company with limited liability

Choose a method of accounting

Before filing your first business tax return, you will need to choose one of two possible accounting methods. If you haven't yet landed on an entity type, you can read more about choosing the right business entity for your startup here.

1. Cash-based accounting

The simplest form of accounting, cash-based accounting, tracks income when it is actually received and expenditure when it is actually paid.

2. Accrual Accounting Base

Accrual basis accounting counts money when it is "earned" rather than received (and the same with expenses).For example, if you sign a large contract with a customer, you'd consider the money you've earned, even if it hasn't paid you yet. This method is more complex, but it allows you to more accurately track a long-term business picture—especially useful when reporting to investors or making fast-paced scaling decisions.

What financial records should the start-up keep?

So you've chosen an entity and an accounting method, and your business is going on. What kind of financial records do you actually need to keep track of?


Keep track of the documentation showing the income, expenses, deductions and credits shown on your tax return. These may include:

  • Receptions
  • Statements of bank and credit card
  • Bills are
  • Cancellated checks
  • Factory invoices
  • Proof of payment
  • The bench or your accountant's financial statements
  • Previous Tax Return
  • Forms W2 and 1099
  • Any other documentary evidence supporting the item of income, deduction or credit shown on your tax return

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