How to Keep Track of Expenses for Taxes

Keeping track of expenses is an essential element of running a business. Because a vast amount of business expenses are tax deductible, small-business owners should develop a financial accounting system that allows for accurate record-keeping. For the majority of small-business owners, keeping track of expenses will be as simple as keeping an expense journal that holds receipts and financial statements that will be categorically arranged so that, during tax time, all deductible expenses can be easily tallied and computed.

Things You'll Need

• Envelopes
• Ledger

Instructions

1. Develop a list of categories for expenses related to operating the business. For example, expenses for a flower shop owner might be rent, utilities, merchandise (direct and indirect), advertising and labor.

2. Organize all records, i.e., receipts, into the developed categories by placing them into envelopes or file folders.

3. Develop a register that keeps an account of expenses for each category as they accrue. A simple ledger can be used to write down each expense for each category as it happens.

4. Develop an accounting period to balance the register with the payment records, i.e., at the end of the month.

5. Balance the register at the end of each accounting period to ensure that accurate expense records are maintained. Use all receipts and records to balance the register by comparing the amount written down with the amount added up.

References

• Small Business Brief: Keeping Track of Your At-Home Business Expenses
• "Entrepreneur"; 15 Small-Business Tax Deductions; Karin Price Mueller