Records and receipts

In order to understand and manage your financial position, you need to learn to keep records of your earnings as well as your purchases. This chapter will describe the information you need to note to keep accurate records.

What is a receipt?

A receipt is a document that provides information on a purchase, including what you bought, its price, your method of payment, the date and details of the vendor. A receipt may also carry information on the terms of sale. Most vendors will automatically issue a receipt when you purchase an item, but if they don't, they are obliged to give you one at your request.

You may consider it unnecessary to keep receipts for some smaller, unimportant items, such as a takeaway coffee, but for larger purchases it is important that you retain the receipt so that you can refer to it for your record-keeping.

Keeping records

For an overview of your financial position, you should take note of your income (money coming in) and your expenditure (money going out), including purchases. You should also include details of payments you schedule for the future, such as a loan repayment or a credit card bill. These repayments indicate that you assume a debt (money you owe) for your purchase.

At a glance, a simple record will show you what you have and what you owe. The balance is the amount that you have left after you use everything you have to pay for items and pay off everything you owe. This gives a true account of your financial status. Sometimes this number is negative if you have a greater expenditure than income, in which case you need to look at ways to spend within your available funds.

Your record will also track the businesses you have paid, when and how much you paid and accounts that are still outstanding (remain unpaid). Refer to your receipts for details of your expenditure.

In the past, accountants used ledgers, which are ruled books where they record transactions by hand. Now with computers in common use, there are a number of programs that make record-keeping easy using spreadsheets, such as Microsoft ® Excel. Spreadsheet software allows you to fill columns and rows with data and calculate amounts. You can provide formulae for each cell (a space at which a column and a row intersect) where the amount may relate to another amount on the sheet.

If you wanted to calculate your annual income by multiplying your weekly pocket money, you would compose a formula where the annual total equalled 52 times your weekly income. If your pocket money increased, you could change the pocket money cell and the annual income cell would be 52 times the new amount.

You can start a new spreadsheet whenever you want, but it is generally easier to keep records in a particular order with regard to time periods e.g. weekly or monthly. Collective records form a database, which will give you a good idea of your financial habits over time.

Businesses also use databases to track relevant information about their customers. Financial institutions such as banks, for example, will keep a record of how much their customers deposit and withdraw, borrow and repay.