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Why Good Record Keeping Is So Important

Whether you own a business or simply maintain your own personal finances, good record keeping is essential and important to staying organized and saving money.

More specifically, anyone that owns a business must keep accurate records at all times. Keeping good and detailed records is essential to long-term business success.

That said good record keeping consists of several important and necessary elements that must be considered. Let's take a look at a few of these examples.

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Monitoring the long-term and short-term progress of a business is one of the first reasons to always maintain good record-keeping. Good record keeping ensures that you are able to monitor the progress of your business in an accurate, organized and detailed way.

Good record keeping helps to show whether or not a business is improving, declining or maintaining steady growth. It also helps outline the products that are selling, and what changes may need to be made.

In the simplest of terms good record keeping can only serve to increase the likelihood that a business will succeed.

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Good record keeping also helps businesses prepare financial statements in the right way.

The importance of accurate financial statements cannot be underestimated when it comes to filing taxes or even selling a business. From a profit and loss statement to a balance sheet, there are many different types of financial statements that can help a business deal with the bank, creditors or the IRS in a more accurate and timely way.

As a note, a balance sheet typically shows assets, liabilities and equity in a business on any given date. Conversely, an income statement is designed to show income and expenses of a business over a given period of time.

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Good record keeping also facilitates being able to identify sources of income. Businesses typically receive money from different sources throughout the year. Good records can help to identify the sources of all income.

Businesses require this type of information as a way to separate nonbusiness receipts and business receipts as well as taxable and nontaxable income.

Accurate records also help to keep track of deductible expenses. This ensures that a business owner does not forget expenses when it comes time to file a tax return.

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Finally, good record keeping helps businesses keep track of basis on property. This simply means that an investment in a property is accurately tracked for tax purposes.

The basis is used to figure the gain or loss when transacting a piece of property. When it comes to preparing a tax return, good records are essential. Records must support income, expenses and any credits that you may report.

Records must always be readily available for the IRS if they are ever called upon. Contact The Gartzman Law Firm, P.C. an Atlanta, Georgia tax lawyer for guidance and assistance in a wide range of tax related issues.

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