Keeping up-to-date and accurate records helps businesses succeed in many ways. Records help track the progress of a business, help monitor expenses and deductions, assist in preparing financial statements, show all sources of receipts, and help prepare and support tax filings.
Basic record keeping is required to manage all day-to-day dealings. These include an overall summary of all business transactions; profit/loss statements that show gross receipts, returns, and credits; income statements showing all gross income; and a business checking ledger that lists all business-related expenses.
In addition to basic bookkeeping, there are several supporting documents each business should keep. These documents are necessary for tax and legal purposes, but also speed up the process of creating end-of-the month/year reports.
All money received from the sale of goods or services is considered gross receipts. Documents that should be kept for proof of gross receipts include deposit tickets; cash register, credit card, or written receipts; invoices; and 1099-MISC statements. Any purchases the business makes, whether for the business itself or for resale, should be recorded as well. Such transactions include purchases of materials or inventory, office supplies, advertising expenses, insurance, and even trade dues. Some of these items may also need to be recorded on asset or depreciation statements. Back-up documentation for these entries includes invoices, cash receipts, cancelled checks, account statements, and credit card receipts.
Any expenses incurred from travel, entertainment, or transportation should also be documented and recorded for tax deduction purposes.
Sales tax paid to state and local governments, federal employer taxes, and employee taxes all need to be documented.