Knowing What Business Records to Keep

When you run your own business, it pays to be meticulous about recording everything that pertains to your commercial activities. The more you understand what you have to record, the more accurate your

Tracking income

Receiving checks for your goods or services is the fun part of doing business, and so income is probably the kind of data that you'll be happiest about recording.

You need to keep track of your company's income (or, as it is sometimes called, your gross receipts) carefully. Not all the income your business receives is taxable. What you receive as a result of sales (your revenue) is taxable, but loans that you receive aren't. Be sure to separate the two and pay tax only on the sales income. But keep good records: If you can't accurately report the source of income that you didn't pay taxes on, the IRS will label it unreported income, and you'll have to pay taxes and possibly fines and penalties on it.

Just how should you record your revenue? For each item, write down a brief, informal statement. This is a personal record that you may make on a slip of paper or even on the back of a canceled check. Be sure to include the following information:

• Amount received

• Type of payment (credit card, electronic cash, or check)