Business expenditure falls into three key areas for the purpose of reporting your profit or loss. You can save yourself, or your accountant, time by grouping your costs accordingly in your purchase list or 'ledger'. The three key areas are:
If your business is VAT-registered, you will need to record details of any VAT included in your expenditure. See our guide on accounts and records for your VAT.
The back-up records for your business expenditure fall into two categories. As with sales records, they will vary according to your business type.
1. Purchase/expenditure documentation
2. Proof of expenditure relating to the above
It is important for you to be able to cross-reference your records to your expenditure figures if asked. If you mislay a receipt for a small item, make sure you enter it in your purchase or petty cash book ledger and make a note that you have lost the receipt.
HM Revenue & Customs