Keeping Good Business Records
Why It is Important
for Your Business, and Required!
A business owner who keeps good records is able to easily monitor the
progress of his or her business. Records can show whether the business is
improving, what items are selling, or what changes may be necessary to
make it more profitable. Keeping good records can increase any business
owner’s chances of success.
Records are needed to prepare your financial statements. Income statements
and balance sheets are used to prepare your income tax returns. Saving
your receipts makes it easy to keep track of which expenses are
business-related and which ones are not. Keeping good records also helps
you to distinguish between taxable and nontaxable income.
Keeping track of expenses lessens the chance that you’ll forget which
expenses need to be deducted when it comes time to prepare your tax
return. Any record that supports the information reported on your tax
return is a record worth saving. If the IRS audits your tax return, having
a complete set of records for the year in question will speed up the
examination process.
A business owner should know that the federal Internal Revenue Code
requires each taxpayer to maintain "such
books and records, including inventories, as are sufficient to establish
the amount of gross income, deductions, credits, or other matters
required to be shown by that person in any return of such tax or
information."
