by Michael Lodge
We have a lot of small to medium size business clients that come into our office during tax time that have various methods of recording your business transactions. Some in shoe boxes, plastic bags, pieces of papers, and the list goes on. But there are some that are really focused on their business and hire our firm to do their monthly accounting or they have their own software that they try to keep up on the record keeping and recording of documentation. I suggest spending a few bucks (its deductible) and have a firm collect, document and record your business transactions (monthly, quarterly or yearly).
A good record keeping system includes a summary of your business transactions. Business transactions are ordinarily summarized in books called journals and ledgers. You can buy them at your local stationery or office supply store.
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.
Whether you keep paper or electronic journals and ledgers and how you keep them depends on the type of business you are in. For example, a recordkeeping system for a small business might include the following items:
- Business checkbook
- Daily and monthly summary of cash receipts
- Check disbursements journal
- Depreciation worksheet
- Employee compensation records
Note: The system you use to record business transactions will be more effective if you follow good record keeping practices. For example, record expenses when they occur, and identify the sources of income. Generally, it is best to record transactions on a daily basis.
For help in recording your transactions or monthly bookkeeping services, call our office at: 877.778.1770