03/12/2018 0 Comments
How to Organize the Expenses and Income of Your Business to Prepare for Year-End Taxes (Part I)
This is the first of a four-part series of blogs where we cover everything you need to know to stay in control of your business' taxes.
A sole proprietorship may be the simplest type of business venture, but that doesn't mean you don't need to make careful preparations for tax season. As a small business, keeping good records of your income and expenses is essential for satisfying your tax reporting obligations. It can also help the Airdrie accountants at Padgett Business Services maximize your deductions and minimize your tax liability.
What Types of Records To Keep
In order to support claims of business income and expenses on your Airdrie income taxes, you should be keeping records of all business transactions. Records can be a wide range of documents that contain income and expense proof in written or digital form. They are divided into income records, expense records, and cost of sales records.
Your business income records should reflect your gross income from all sales, commissions, and fees before deducting any expenses. All income claims must be supported with original documents that show the amount, the source of income, and the date. Examples of supporting documents for income claims include:
• Sales invoices
• Statements of fees
• Cash register tapes
• Bank slips
All costs associated with running your business must be documented with a proper receipt that notes the date, a description of the goods or services purchased, the name and address of the seller, and the name and address of the buyer. If any of this is not provided, such as on a cash register receipt, then note the information in your own records. Examples of business expenses include:
• Licenses, insurance, and memberships
• Delivery and freight
• Non-vehicle fuel costs
• Office expenses
• Business meals and entertainment costs
• Repairs and maintenance
• Bank charges, loan interest, and bad debts
• Business taxes
• Professional services
Cost of Sales Records
While cost of sales also represents an expense, it is considered separately in order to differentiate the costs of running a business and the direct cost of producing goods. Your cost of sales records should include inventory at the beginning of the year, purchases for resale over the year, and inventory at the end of the year.
Choose a bookkeeping style that you find easy to use and understand. Perhaps your income and expenses are simple enough to track in an excel spreadsheet, or maybe an accounting software would be better suited to your needs. No matter what system you use, make sure you keep all paper and digital records neatly filed and organized. It's also a good idea to scan and digitize paper records.
A business accountant in Airdrie who uses innovative small business solutions such as cloud computing can help you find the best bookkeeping style for your needs.
Bookkeeping Services in Airdrie for Small Businesses
At Padgett Business Services, we have been helping sole proprietors in Airdrie with their income taxes for more than 40 years. We provide financial consultations, monthly bookkeeping services, financial reporting, and expert small business advice. Having a dedicated accountant on your side as you work to grow your business can save you time and money.
If you need small business accounting services in Airdrie to help you prepare for tax season, then don't hesitate to contact Padgett Business Services today.