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What could be a risk to a client that only uses a simple cah book, with no analysis nor a charter of accounts, as an accounting system?

Refiloe Mohapi's Profile

There is a client I'm working on and this client uses excel as its accounting system. The problem is, the cash book is not analyzed into the kind of expenditure, e.g Repairs and Maintenance, Staff Welfare, Training, etc. It just shows the payments done and that's all. Please help.


Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |


There are a long list of problems;
-There are statutory filings, depending on the locale, but generally think "1099". If you don't have a way of tracking, you can't file and can get penalized.
-Again, depending on the locale, there are a variety of bases for business taxation. If you cannot properly account for your assets and liabilities (eg; cost and amortized value of equipment, etc), you could need to rebuild everything from the ground up *and* get penalized.
-If there are payments to individuals, you could run afoul of the "reimbursement" vs "compensation" problems, and end up owing money to a variety of agencies unless you can demonstrate the reasoning for your reporting (and penalties, of course).
-If they are a schedule C filer, how are they going to segregate (which is mandatory)?

That's just a few.


Refiloe Mohapi
Title: Manager: Internal Audit
Company: Standard Lesotho Bank Limited
(Manager: Internal Audit, Standard Lesotho Bank Limited) |

Thank you

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

It depends on the materiality. If this is a one person shop and, there is little expense activity, and none of the activity relates to payments to others for labor, this could work.

i.e. I'm an artist. I sell my work. I buy supplies during the year. Maybe 100 transactions in the cash book. This isn't the end of the world.

But, you did mention staff. Right there an issue arises. Now you're talking payroll and payroll reporting along with worker's comp, etc.


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