Basic,Business,amp,#58,Good,Re DIY Basic Business: Good Record Keeping

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Everyone in business must keep records. What can good record keeping do foryou? I'll give it to in a straight no-glamour content.Let's Start Now:Make sure you monitor the progress of your business: Good record keeping canshow whether your business is improving, which items are selling and whatchanges are needed. Good record keeping can be the difference betweenfailure and success.Prepare accurate financial statements: You need good records to prepareaccurate financial statements. These include income (profit and loss)statements and balance sheets. These statements can be a big help whendealing with your bank and creditors. An income statement shows the incomeand expenses of the business for a given period of time. A balance sheetshows assets, liabilities and your equity in the business on a given date.Identify source of receipts: You will receive money or property from manysources. Your records can identify the source of your receipts. You needthis information to separate business from non-business receipts and taxablefrom nontaxable income.Keep track of deductible expenses: You may forget expenses when you prepareyour tax return unless you record them when they occur. Believe me you willneed all the deductible expenses you can find.Prepare your tax returns: Records must support the income, expenses andcredits you report on your tax returns. Generally, these are the samerecords you use to monitor your business and prepare your financialstatements. You must keep your business records available at all times forinspection by the IRS and/or your State Department of Revenue. If the IRS orState Department of Revenue examines any of your tax returns, you may beasked to explain the items reported. A complete set of records will speed upthe examination and make the experience feel that much less like a rectalexam.What kind of records should you keep?Except in a few cases, the law does not require any special kind of records.You may choose any system suited to your business that clearly shows yourincome.The type of business you operate affects the type of records you need tokeep for federal tax purposes. You should set up your books using anaccounting method that clearly shows your income for your selected tax year.If you are in more than one business, you should keep completely separaterecords for each business.A few Bookkeeping Tips:* Daily business records are the best* Identify source of receipts* Record expenses when they occur* Keep complete records on all assetsSome supporting documents you will need:Purchases, sales, payroll and other transactions you have in your businesswill generate supporting documents such as invoices and receipts. Thesedocuments contain the information you must record in your books.It is important to retain these documents because they support the entriesin your books and on your tax returns. You should keep them in an orderlyfashion and a safe place.Supporting documents include sales slips, paid bills, invoices, receipts,deposit slips and cancelled checks. Generally, it is a good idea to keepyour supporting documents in file folders in designated categories. Forexample, if you write a check to Joe's Office Furniture and record theexpense as "office supplies", then the receipt should be placed in a foldermarked "office supplies".Gross Receipts are the income you receive from your business. You shouldretain supporting documents, which show the amounts and sources of yourgross receipts. Examples of gross receipts include cash register tapes, bankdeposit slips, receipt books, invoices, credit card charge slips, emailrecords and your forms 1099-Misc.Purchases are the items you buy and resell to customers. If you are amanufacturer or producer this includes the cost of raw materials and/orparts purchased for making into finished products. Your supporting documentsshould show the amount paid for those purchases. Examples of documents forpurchase include cancelled checks, cash register tapes, credit card slips,email records and invoices.These records will help you determine the value of your inventory at the endof the year.Expenses are the costs that you incur to carry on your business. Yoursupporting documents should show the amounts paid for those businessexpenses. Examples of documents for expenses include email documents,cancelled checks, cash register tapes, account statements, credit cardslips, invoices and a petty cash system for small purchases.A petty cash fund allows you to make minimal payments without having towrite checks for small amounts. Each time you make a payment from this fund,you should prepare a petty cash disbursement slip and attach it to yourreceipt as proof of payment.Travel, transportation, entertainment and gift expenses require some extradocumentation to deduct them as business expenses. For example, to deductthe cost of taking a client to lunch, you should record the name of theclient, the purpose of the lunch and topic discussed at the lunch.Assets are the property, such as your computer and fax that you own and usein your business. You must keep records to verify certain information aboutyour business assets. You need records to figure the annual depreciation andgain or loss when you sell the assets. Your records should show when and howyou acquired the asset. Also include the purchase price, date of purchase,cost of any improvements, deductions taken for depreciation and deductionstaken for casualty losses like fires or storms, how you used the asset, whenand how you disposed of the asset, selling price and any expenses of thesale. Example of these supporting documents may include purchase or salesinvoices, real estate closing statements and cancelled checks.This is a just quick, crash course article on basic record keeping. But,whatever your business, remember, good record keeping is essential to theyour financial survival. So take the time and keep good records. Theheadaches you save may be your own.Thanks for reading Article Tags: Good Record Keeping, Cash Register Tapes, Good Record, Record Keeping, Must Keep, Supporting Documents, Cash Register, Register Tapes, Petty Cash