Recording income correctly is fundamental to accurate accounts and accurate taxes. Here's exactly what to record, when to record it, and how to organise it.
What Counts as Business Income?
Business income is any money your business receives in exchange for goods or services. This includes:
What's not business income: personal funds you invest in the business, loans you receive, GST/VAT collected on behalf of the government (this belongs to the tax authority, not you), and refunds you receive for business expenses.
Keeping these categories clear from the start saves significant confusion at tax time.
When to Record Income: Cash Basis vs Accrual
The timing of when you record income depends on your accounting method:
Cash basis: Record income when cash is received. If you invoice in March but are paid in April, the income is April's.
Most sole traders and small businesses use cash basis for simplicity. Your income for the year = what actually landed in your bank account from business activity.
Accrual basis: Record income when it's earned — when you issue the invoice, regardless of when cash arrives. If you invoice in March, it's March income even if payment arrives in April.
Accrual gives a more accurate picture of performance (especially for businesses with large receivables) but is more complex. Required above certain thresholds in some countries.
Know which method you're using, and be consistent.
What to Record for Each Income Transaction
For every sale, record:
Date: When the income was received (cash basis) or earned (accrual). Amount: The net amount, excluding any GST/VAT you collected on behalf of the government. Client/source: Who paid you. Useful for client profitability analysis and if a client ever disputes a payment. Invoice reference: Which invoice this payment relates to. Payment method: Bank transfer, cash, card, etc. Useful for reconciliation. Category: Service income, product sales, etc. — for your profit & loss reporting.
How to Record Income in Practice
Invoice-based: Issue an invoice when the sale is made. When payment arrives, mark the invoice as Paid and record the payment date and amount. Your accounting software creates the income record automatically.
Point of sale: For retail or cash transactions, record each sale as it occurs, or record daily totals from a point-of-sale system.
Recurring/retainer: For fixed monthly fees, record the income each month when payment is received.
Never record income informally as "cash received" without linking it to an invoice or sale record. If you're ever audited, every income item needs to trace back to a transaction.
Bank Reconciliation: The Check
Once a month, compare your income records to your bank statement. Every income item in your records should match a deposit on your bank statement, and every deposit on your bank statement should be recorded in your accounts.
Unexplained bank deposits are unrecorded income — a tax risk. Recorded income not on your bank statement means either you haven't been paid (check your receivables) or it was recorded incorrectly.
This reconciliation process catches errors, confirms completeness, and keeps your records accurate.
GST/VAT: Keep It Separate
If you're registered for GST or VAT, you collect tax on top of your sale price and remit it to the government. This is not your income — it passes through you.
Record your income as the net amount (excluding the tax), and track the tax collected separately in a liability account. This makes your tax returns straightforward and prevents the common mistake of treating GST/VAT collected as profit.
Categorising Income for Useful Reporting
Breaking income into categories gives you more useful financial information than a single "revenue" bucket. Common categories for small businesses:
With categories, your profit & loss report shows not just total revenue but where it comes from — essential for understanding which parts of your business are growing.
Income Recording in Quotation Expert
In Quotation Expert, every invoice you issue creates an income record. When you mark an invoice as Paid, the payment date and amount are recorded. Your sales report shows total invoiced, total collected, and outstanding by period. The P&L report incorporates all income alongside expenses to give you a complete financial picture — all from the invoices you're already creating.
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