It’s no news that record keeping is important for all businesses to deduct their business expenses. These business expenses must be able to have certain elements of information. The best method is to maintain adequate evidence by establishing your books and keeping them up to date.

 (3) General rules to follow to substantiate business expenses

  • Keep in mind that business expense cannot be estimated or have approximate numbers
  • Documentary evidence should show the amount, date, place and character of the expense
  • Providing a written statement of the business purpose of the expense substantiates the nature or character of the expense

Example:

Expense Type   AmountDateVendor Description Business Purpose and Relationship           
Travel $35012/01/2016American AirlineDestination to California, Los Angeles, XYZ Corporation Office LocationMeeting with CEO of XYZ Corporation to close a contract

A timely-kept record has more value than a statement prepared later. A lack of accurate recall may give inaccurate business purpose or relationship. QuickBooks or Xero Software can help you with a weekly or monthly timely-kept bookkeeping record.

Do you have questions about how to maintain a good business record? Feel free to get in touch with the professionals at 365 BOOKSPRO for all your bookkeeping needs!