You need to keep accurate records of your business expenses and income for tax purposes. The IRS may need to see your accounting ledger and receipts to verify financial statements. Keeping an accounting ledger can also help you track your income and various business expenses. You can purchase a ledger from an office supply store or set one up yourself. Once you have one, recording your incoming payments and outgoing expenses will require dedication and accuracy, but should not take up too much of your workday.
Items you will need
- Filing cabinet
Dedicate a filing cabinet for storing records of all of your business transactions, including expenses and income. Dedicate one drawer to outgoing expenses and one drawer to incoming funds. Divide the drawers by folders for each month.
Collect every receipt you receive. Keep copies of paid bills to record their totals. Keep copies of paid invoice or other income statements to record income.
Divide your accounting ledger into two categories, one for expenses and one for income. Divide each category into three columns. Use the first column for the date, the second for the type of expenditure and the third for the dollar amount.
Record your income into the income section of your ledger. Mark the date you received payment, type of income and dollar amount for every payment you receive. Repeat this process weekly, or daily if you have several payments a day.
Record your expenses in the expenses section of your ledger. Mark the date you made the purchase in the date category, the type of purchase made and how much you spent. Repeat daily or weekly for every purchase.
Place your expense receipts and records into the file for the current month. Place the file into the second drawer of your filing cabinet.
To simplify the process, sort your receipts and income statements before working on the accounting ledger.
Do not lose track of your receipts. You may need them to prove tax deductions during an IRS audit.