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Lower Tax Bills And Bookkeeping For Little Company

By: Ike Ani

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Tax authorities are often relaxed about the need for small company to prepare and produce formal accounting information. Often the requirement is simply that each business retains sufficient financial records to support the accounts submitted.
Such advice from tax authorities places a burden upon little business in that the vast majority are honest difficult working people who are meticulous about maintaining accounting records of sales made throughout the monetary year. Unfortunately numerous little companies aren't so meticulous about keeping financial information of company costs in their accounts.
A typical taxi driver may for instance keep a diary and record the daily receipts from his fares. If those recorded receipts are accurate then the total sales turnover for the year will show the correct total. The same might not be true of costs and also the accounts thereby overstated.
The total company expenses from the taxi driver would mainly include the fuel receipts plus the other running costs of the business. Typically a receipt for fuel will be obtained and kept in a file or shoe box. Some might get mislaid and lost and be missing from the final accounts preparation.
Other receipts for miscellaneous items may not even be retained as forgotten, lost or not thought of at the time of purchase. Examples might be buy from the diary in which sales information are kept, business cards, other stationery, and cash payments for a whole variety of miscellaneous products.
The same practice is also frequently applicable to not just taxi drivers but many little businesses.
A small company owner may visit a supermarket for groceries and also buy an item of stationery for business use the price of which is lost when the grocery receipt is discarded. If close attention is paid then the stationery item could have been obtained on a separate receipt and the cost of the journey to purchase it also included in the company costs.
The stationery item is just one example which might be multiplied hundreds of times with hundreds of various items throughout the financial year. While every item missed and unrecorded may not be significant the total could well be sufficient to significantly reduce the year end tax burden by lowering the net taxable accounting profit.
Having retained a separate receipt for everything it's useful if the receipts are filed and the bookkeeping system employed updated at least once a month and preferably every week. By updating the accounting information on a normal basis a lot more costs is going to be recorded as the memory will remember recent costs more clearly and accurately.
An additional useful method to ensure all business costs are maximized would be to keep a every day diary of all expenses incurred. Use the entries in the diary when updating the bookkeeping information to ensure nothing has been missed within the accounts.
The essential message would be to be meticulous about keeping receipts for everything, no matter how little, and recording both income and expenditure on a normal basis so that items are not lost or forgotten and included within the bookkeeping records. By also keeping a diary of financial information even if a receipt has been mislaid the amount should still be included within the accounts. It might be disallowed later if the tax records are inquired into but that is a matter of negotiation with the tax authority from a standpoint where the financial records are correct.
In addition all small company should take some time to review all potential expenditure which can be claimed under the tax rules. Many valid expense products can be missed having been dismissed as ordinary costs which might be company related and therefore claimable in the financial accounts.

Article Source: http://depositarticles.com/

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