Are you disturbed by the manner your business transaction records are kept? You are worried and unsure that the books for your business transactions are not in order. Have you been subjected to the perpetual fear of the best of judgment by the tax authorities? You have been looking for a solution, but it looks like the solution is faraway, worry not, your solution is not far. We have taken it upon ourselves to take you through the route of getting the full knowledge that will give you full confidence to stand bold and overcome the fear of the best of judgment by the tax authorities or for any other assessment.
We will let you know what keeping a transaction book entails, processes you need to embark on to be on the right track in your business and stand tall anytime there is a test of judgment by the tax authorities
In few cases, the taxpayer fails to file the required tax, or the records used to file the tax are inaccurate, or when the records submitted are unreliable and incomplete. When such situations exist, it means tax authorities will not rely on the figures supplied; they will rely on their own judgment to give the required figure based on the information in the bank statement, industry benchmark,s and patterns of turnover. From this little analysis, best of judgment can be seen as the power granted to the tax authorities (in this case IFRS and state IRS), to assess and estimate the amount of tax payable by the taxpayer based on the relevant information as obtained and observed by the above-mentioned records.
This best judgment is nullified when you are sure you have the right record and have also filed the required tax according to the right record you have from your books. This best of judgment always puts fear in the minds of taxpayers due to the fact that records concerning their business are wrongly kept. Some that even made an attempt to keep them cannot find where the records are due to wrong records filed about their businesses.
We have come to let you know what business transaction bookkeeping is, and the necessary things or steps to guide you in maintaining these records for smooth business processes.
What is Business Transaction Bookkeeping?
Business transaction bookkeeping is the record of your business transaction activities like the financial records of money received and paid out in the course of the business in an organized and proper way that can be easily retrieved at any time, and bookkeeping is the systematic record of your daily business transactions so that items like income and expenses can be traceable, enables the preparation of financial statements, create an easy process for tax filing, make audits possible and give you confidence to defend CAC and IFRS reviews. This write-up will expose you to what records you must keep, how to go about it and as well, maintain the records.
Types of Records You Should Keep for Your Business Transactions
Income Record: This is used to recording all the money that is received due to your transactions in sales, services, and other activities like commission.
Expenses Record: This will be used to record all the money spent in the course of carrying out your business activities, examples include but are not limited to salaries, rent, fueling, and utilities etc.
Purchase/Inventory Record: These include those goods that you bought in your business for the purpose of reselling them , like raw materials and stocks, You record these transactions in a purchase/Inventory book.
Asset and Liabilities Record: Assets include major big long-term purchases that aid in the business operation, and liabilities are the obligations owed to the people that have invested in the business. It also includes every item of capital that have been invested by the owners for growth and business improvement. It is very important to record all these things correctly.
While you have known the records you must keep, it is still good to take you once again to the route of books you must maintain in the course of your business.
Cash book: This is very important. It is used to record all the money that is received and paid out in a business transaction. It is always necessary to keep this book because it will always be used for the purpose of your bank reconciliation process.
Sales day book: This is the record of your daily sales with names, amount. The Purchase day book also records your daily purchase for resale, their amount and date.
Expenses ledger: This shows details of the business expenses.
Debtors Ledger: This shows all the names of people and organizations that owe the business and their amount.
Creditor’s Ledger: This shows the names of the people and the amount that the business owes.
General ledger: This is a summary of accounts that the business has maintained and from where the financial statement of the business can be prepared. Another major record is the fixed asset register, which is another major record the business has to keep for the purchase of major business assets.
It should be noted that proper record keeping of these books will surely guide in the smooth operation of the business. This will surely enable proper defense during audit by the IFRS or state internal revenue service, assist in sourcing a loan from the bank, enable accurate record of Value Added Tax (VAT), withholding tax (WHT), and others. This will also help you to ascertain your profit for the period, and also guide you to stay above penalties.
It is the lack of knowledge of what to record and how to record the business transaction that results in this document not being kept and subsequently causing panic anytime there is a best of judgment from the tax authorities.
Do the right thing today, and overcome the fear of best of judgment.
Also Read: Types of Records that Small Business Owners Needs to Keep
