Whenever you make a purchase for resale, put the receipt into the appropriate month’s folder.
Set up your inventory file with twelve folders, one for each month.
These are the expense numbers that you should enter on your Schedule C or give to your tax preparer. Review your check register for purchases paid by check and add these to the amounts on each folder. Write the total on the outside of the folder. Debit and credit purchases will show up on your statements but placing your receipts into a folder as-you-go will save you having to sort through statements to identify and categorize expenses.Īt the end of the tax year, total the receipts in each folder and staple them together. Throughout the year, place your receipts into the appropriate folder. If you’re paying casual labor or other expense in cash, have a receipt book available so you can fill out details on the spot. Get a receipt for all transactions: cash, debit, and credit. In the expenses file, label folders alphabetically for each Schedule C expense that you want to track. Keep track of your expenses and cost of goods sold throughout the year and you won’t feel a crunch come tax time. If you are unsure whether a particular expense qualifies as a deduction, please consult your tax advisor.
#KEEPING TRACK OF DAILY EXPENSES HOW TO#
Keep in mind that although I can offer tips on how to organize your records, I’m not allowed to give tax advice. Discuss the alternatives with your accountant and adjust your record-keeping accordingly.įor purposes of this discussion, expenses will be tracked annually, and inventory will be tracked monthly. There are several ways to track COGS (see your accountant for an explanation of each). Of course, the accuracy of your numbers will depend on your diligence in working the system. Inventory and expense records are kept separately because inventory is an asset inventory items are not deductible from income until they are sold (hence, “cost of goods sold”). Expenses and Inventory will be kept in paper file folders, so you can keep track of your receipts. Sales can be tracked on an Excel spreadsheet or a paper ledger. The system takes, on average, half an hour per week and helps avoid an annual tax panic.Įssentially, you will separate your business expenditures into three primary categories: Sales, Expenses and Inventory. Those who struggle with multiple Excel spreadsheets and bank card and online store statements may find this a refreshing approach. But in the meantime, you must pay your taxes and this system will simplify that task. Is Schedule C-based record-keeping “good” accounting practice? No eventually you may want a management accounting system that will give you the ratios and data you need to more effectively manage your business.
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