Tammy Hoang
KEEPING RECORD FOR BUSINESS - WHAT YOU NEED TO KNOW
Keeping accurate records helps you
pay the right amount of tax
avoid paying any extra tax or penalties
keep track of your expenses
see quickly what you are owed by others and how much you owe them
ask for a bank loan or credit if you need to
save time and accountancy costs
receive the right amount of benefits or credits.
How long should I keep records
The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your record until the period of limitations for that tax return runs out. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.
Note: Keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.
What kind of records should I keep?
If your business has complicated financial records or if you want to be able to prepare financial statements with the click of a button, business accounting software can be a big help. Your recordkeeping system should include a summary of your business transactions. Your books must show your gross income, as well as your deductions and credits.
The following are some of the types of records you should keep:
Gross receipts
Purchases
Expenses
Travel, Transportation, Entertainment, and Gift Expenses
Assets
Employment taxes
How should I record my business transactions?
Business transactions are ordinarily summarized in books called journals and ledgers.
A journal is a book where you record each business transaction shown on your supporting documents. You may have to keep separate journals for transactions that occur frequently.
A ledger is a book that contains the totals from all of your journals. It is organized into different accounts.
Electronic Records: All requirements that apply to hard copy books and records also apply to business records which are maintained using electronic accounting software, point of sale software, financial software or any other electronic records system. The electronic system must provide a complete and accurate record of your data that is accessible to the IRS.