Can AI do my bookkeeping?

Receipt · 2026-08-12

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The exact prompt

Set out a month-end bookkeeping routine for my small UK business: the reconciliation steps against the bank statement, the records I must capture for HMRC, and the checks that catch duplicate or missing entries. Then list the judgement calls I should keep for myself or my accountant, with one line on why each is a judgement call.

The raw output

# Month-End Bookkeeping Routine for UK Small Business

## 1. Bank Reconciliation Steps

**In sequence:**

1. **Print/download bank statement** for the full month
2. **List all uncleared items** from previous month (cheques, transfers still pending)
3. **Tick off each statement line** against your accounting records in date order
4. **Identify timing differences:**
   - Cheques issued but not yet presented
   - Deposits in transit
   - Bank charges/interest not yet recorded
5. **Create reconciliation statement:**
   - Bank statement balance
   - Plus: lodgements not yet cleared
   - Less: cheques not yet presented
   - Equals: should match your cashbook balance
6. **Investigate any variance** of more than £0 immediately—don't leave it
7. **Document** the reconciliation with statement and supporting detail

---

## 2. Records to Capture for HMRC

**Keep and organise:**

- **Invoices issued** (with issue date, customer, amount, VAT if applicable)
- **Invoices received** (with receipt date, supplier, amount, VAT claimed)
- **Bank statements** (all months, all accounts)
- **Payroll records** if you have employees (payslips, RTI submissions, tax deductions)
- **VAT records** (if VAT registered: sales list, purchase list, VAT return workings)
- **Expense receipts** (in categories: mileage, materials, utilities, professional fees, etc.)
- **Fixed asset register** (if you own equipment/vehicles with Capital Allowance claim)
- **Credit card statements** and reconciliations (if business card used)
- **Cash book or till rolls** (if cash-handling business)
- **T&S/mileage log** (if claiming travel or mileage relief)

**Retention rule:** Keep all records for **6 years** from the end of the tax year to which they relate (HMRC can ask further back if fraud suspected).

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## 3. Checks to Catch Duplicates and Missing Entries

| **Check** | **How to run it** | **What to look for** |
|-----------|------------------|---------------------|
| **Duplicate transactions** | Sort all entries by date and amount; scan for exact repeats within 1–3 days | Same supplier, same invoice number, same amount on different dates |
| **Missing entries** | Reconciliation fails to zero | Bank has charged/credited something you haven't recorded |
| **Unmatched invoices** | List all invoices issued vs. all bank deposits; list all invoices received vs. all bank payments | Revenue not banked; expenses not paid or paid late |
| **Aged payables/receivables** | Run an aged debtor/creditor report | Invoices outstanding >60 days (may indicate non-receipt, dispute, or bad debt) |
| **Round-number suspicion** | Filter for round amounts (£100, £500, £1,000) and review | Often indicates manual entry errors or estimated figures |
| **Negative balances** | Run balance check on each account or supplier | Should only occur if you're in credit or have overpaid (flag as unusual) |
| **VAT input/output mismatch** | Compare VAT claimed on purchases against VAT charged on sales | Large swings month-on-month may flag errors |

---

## 4. Judgement Calls for You or Your Accountant

| **Area** | **Why it's a judgement call** |
|---------|-------------------------------|
| **Bad debt provision** | Requires assessment of customer creditworthiness and payment history; no bright-line HMRC rule on when to write off vs. when to keep trying. |
| **Capitalisation vs. expense** | £1,000 software licence vs. £999: HMRC's de minimis threshold is discretionary; depends on asset life and your policy. |
| **Stock valuation method** | FIFO, LIFO, weighted average, or standard cost each give different profit; no single "right" answer, but must be consistent. |
| **Depreciation rate** | Plant at 25%, fixtures at 10%: depends on your business's actual asset life and wear pattern; not prescribed by HMRC. |
| **Home office apportionment** | If you work from home, calculating the rent/utilities % attributable to business is subjective; HMRC accepts reasonable estimates. |
| **Related-party transactions** | If you pay a family member, the rate and terms must be arm's-length; subjective if you're also being generous. |
| **Provision for warranty/returns** | Estimating future refunds or repair costs based on historical % of sales; no fixed rule, depends on your product/market. |
| **Foreign exchange gains/losses** | Whether to recognise on invoice date, payment date, or year-end; each method produces different profit. |
| **Contingent liabilities** | A legal dispute may result in cost—do you accrue now or disclose as a note? Hinges on probability and certainty. |

---

## Quick Checklist to Print

- [ ] Bank statement downloaded
- [ ] Reconciliation completed and tied out
- [ ] Unmatched items investigated and resolved
- [ ] All invoices received logged and filed
- [ ] All invoices issued logged and filed
- [ ] Expense receipts sorted into categories and filed
- [ ] Payroll (if applicable) reconciled to RTI
- [ ] VAT workings updated
- [ ] Aged debtors/creditors reviewed
- [ ] Duplicate and missing entry checks run
- [ ] Judgement-call decisions documented and ready for accountant

**Recommended frequency:** Do the bank reconciliation **weekly** (takes 15 mins); do the full routine **monthly before month-end** so you catch errors early.