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Record keeping and bookkeeping are both important parts of your business. It's a good idea to
take the time to do them so that you have sufficient information to support your
tax returns. Consult a qualified professional for information specific
to your business.
What We Mean by "Simple Bookkeeping":
- Keeping track of your expenses and income. By "bookkeeping", all we are
referring to is entering details about your expenses and income in a book or a
ledger. "Bookkeeping" does not refer to tax preparation or anything else of
that nature.
- Consult an accountant or tax consultant. This is by no means a replacement
for the advice of a professional.
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Why You Should Do Some Basic Bookkeeping:
- Keeping accurate records helps you monitor your progress. By keeping track
of your income vs. expenses each month, you can see how well your home based business
is doing. Is it growing? Are you progressing towards a profit? If you're already making a profit,
are your profits increasing month after month? Are your expenses under control?
- Your books will help you at tax time. Your accountant or tax consultant will
have your nicely organized and detailed records to work from. This is far better
than a huge jumble of receipts, scribbled notes, and so forth. It will also save
them time preparing your tax return (which in turn saves you money!).
- Your books will help if your home based business is audited. Detailed records will help you
account for all your expenses and income.
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What Records Should You Keep?
You should keep all invoices, credit card receipts, deposit slips, vendor invoices,
cash register receipts, cancelled cheques, and so forth that will document:
- Sources of income for your business.
- Direct expenses which are costs directly related to creating your product or
service, such as materials.
- Overhead expenses. One example of an overhead expense is office supplies.
- Assets. You must keep good records documenting the property and equipment you
use in your home based business. This will support your depreciation claims on your
tax return.
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What You Need to Do Your Bookkeeping:
- File folders and envelopes. These are handy for storing your receipts.
- A notebook. This is where you will enter all the details of your expenses
and income.
- A ledger, if you like. The ledger can be used to enter in your monthly
totals. Many tax consultants prefer to work from your ledger rather than from
your notebook.
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In this section:
Getting Started
Money Matters
Doing Business Online
Your Home Office
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