Every business or organization is involved with daily transactions. These businesses need to keep record of their transactions, income, and expenses. These records are either recorded in digital form or physical form in registers for some business.
These records play a vital role in financial stability for every business and organization regardless of the form they are available in, either digital or paper-based. For the life of a business, they must keep some records of their business. Those businesses who manage to keep their financial and accounts records can playoff the tax issues and defend their business. On the other hand, businesses that fail to keep accounts records struggle to deal with tax payments, refunds and returns. It is important to record your financial matters daily to avoid any misunderstandings and issues later.
Keep scrolling the article to understand the importance of keeping records for tax payments and returns and the important types of accounts documents you must keep.
Top 5 benefits of keeping accounts records
No matter who you are, either a business or a single entity, it is important to keep certain records to deal with tax activities. Without the availability of accounts records, you will find difficulties paying tax and registering for paying tax.
Below are a few reasons why keeping these records is important for tax payment activities.
1. Keep track of your business
Keeping accounts records will help you analyze the tax payment ratios of your business. Your accountants can find the amount of tax you will be paying for a year, depending upon your account’s records. These records will enlist the total income, expenses and assets you managed to have within a year.
These records do not only help in identifying the amount you will be paying as a tax; instead, you can also get an idea about payable taxes and the taxes your business has paid so far.
2. Income sources
People who have a high income or medium-income rates have to defend their incomes while paying for tax. Keeping financial records will help you defend the sources you received the amount for a year. If you cannot defend the amount in your account and the source of that amount, you may face penalties and consequences.
3. Preparing financial statements
Financial statements are one of the important records in terms of tax. Your financial records are the factors that will decide the amount of tax you will be paying. The financial records of businesses are a way to analyze the financial position of a business. If you have financial records and the knowledge of your income and cashflows, you will easily prepare your financial statements.
There are three most important financial statement types that every business must keep to deal with tax matters smoothly. These financial statement types are as follows.
- Income statement
- Balance sheet
- Cashflow statement
4. Tax returning activities
For tax returns and refunds, you must have the accounts records. Without these records, you cannot file a tax return or refund claim. These accounts or financial records include the information of a business’s tax paid amount and the amount they were liable to pay.
If a business made some overpayments, they can claim for refunds and return. These businesses file refund claims with the help of experts within their organization. If you are a business and looking for experts, then you can hire the best VAT consultancy in Dubai to deal with tax refunds and tax registrations for your business.
Two most important types of accounting records
Below are the two most important account records that you must keep as a business.
1. Income statement
An income statement is one of the important account’s records; The income statement shows the total expenses of a business and the income against this expense. It is one of the great sources to check the progress and performance of your business.
A ledger or general ledger keeps the record of an organization’s or a business’s transactions. You will get to see the debit and credited amount in a ledger. The information in the general ledger helps in preparing the income statements and financial statements. The ledger’s entries must be correct, so you will get the correct information for preparing your financial statements. Your transaction records are important when it comes to paying tax.
List of VAT records
VAT tax is one of the most important taxes that a business or a seller must pay. When the manufacturers or the sellers pay these taxes, they must keep a record of it. Without these records, you will not be able to claim VAT refunds. Hire the best VAT consultancy in Dubai to know if you are eligible for VAT or not? And if you are eligible, then what are the ways to VAT register and how to pay VAT.
The following records are some of the VAT records that you must keep as a manufacturer or a business selling services and products.
- Sales records
- Import and export records
Manage your business records with the experts
This article is more than enough to understand the importance of accounts records for playing off tax matters. But these records must be correct and accurate; else, you will end up adding to your loss. Hire the experts to prepare these accounts or financial keep record for your business so you can operate your business smoothly.