MEANING OF ACCOUNTING RECORDS AND BENEFITS OF KEEPING ACCOUNTING RECORDS

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 MEANING OF ACCOUNTING RECORDS

Accounting records are the records of a firm's financial transactions and current financial position. Accounting records are necessary for tax purposes, legal accountability, and adequate financial oversight. They are key sources of information and evidence used to prepare, verify, and/or audit financial statements. They also include documentation to prove asset ownership for the creation of liabilities and proof of monetary and non-monetary transactions.

 BENEFITS OF KEEPING ACCOUNTING RECORDS

It is very important that business owners make a habit of recording their business transactions every day. It will assist in making informed, efficient and precise decisions at any time. Proper bookkeeping involves maintaining up to date accounting system, which includes recording business transactions as they occur, as well as keeping important receipts or bills for substantiating all expenses incurred on behalf of the business. The benefits of keeping accounting records can't be overemphasized and some are:

Saves taxes

Well-kept accounting records act as a reminder of a person's deductible credits and expenses. It's only by keeping correct records of business expenses that owners are able to prove various expenses that were incurred while carrying out business operations. By doing this, they are not forced to rely on memory. This means they only pay what is due, no more or less, as their records remind them of all the expenses they are entitled to claim against their income.

Acts as backup for income and expenses

Without accounting records, tax auditors may be forced to make decisions based on their "best judgment" of what value the income and expenses may be, according to the size, location, or type of a business. Additionally, without the right records, industry standards might be used as a guide in the audit of a business.

Shorten the length of time of the audit

If a business is chosen for an audit, the business owner will be asked to produce the necessary backups to the info filed on the income tax return. Once the business operator has produced the right records, then the tax auditor will be able to examine the records provided and make a timely decision on the accuracy of those records. The auditor will therefore spend less time at the business.
Complies with the law

One of the main advantages of keeping accounting records is to comply with the law. By simply being organized, businesses not only enjoy the above benefits but also stay within the law.

Shows the business's financial position

With the right records, a business owner can identify areas for expansion or improvements. Proper records also help the business owner to secure financing for the business. Additionally, proper analysis of records can help in making the strategic decision of changing business focus.

Avoid interest and penalties

Proper accounting records help business owners to avoid interest and penalties as they make it easier for them to pay the right amount of tax at the right time. Penalties are here forever (if any), but proper records can help business owners avoid them. By the time the deadline comes, everything should be in good order and ready for filing.

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