Why Should I Keep Records?

December 27, 2018

Everyone in business must keep records. Keeping good records is very important to your business. Good records will help you do the following:

  • Monitor the progress of your business

  • Prepare your financial statements

  • Identify sources of your income

  • Keep track of your deductible expenses

  • Keep track of your basis in property

  • Prepare your tax returns

  • Support items reported on your tax return

Monitor the progress of your business

You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success. 

 

Prepare your financial statements

You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. 

  • An income statement shows the income and expenses of the business for a given period of time.

  • A balance sheet shows the assets, liabilities, and your equity in the business on a given date. 

Identify sources of your income

You will receive money or property from many sources. Your records can identify the sources of your income. You need this information to separate business from non-business receipts and taxable from nontaxable income. 

 

Keep track of your deductible expenses

Unless you record them when they occur, you may forget expenses when you prepare your tax return.

 

 

 

 

Learn More:

https://www.irs.gov/businesses/small-businesses-self-employed/why-should-i-keep-records

 

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