Your record-keeping system should include a summary of all the financial activity from your business. For every economic activity that occurs in the business, the following information should be recorded in an accounting journal or a simple ledger:
• The date of the activity
• The dollar amount of the activity
• The description of the activity
In addition, any documentation that can prove that economic activity has taken place should be kept. This could be in the form of cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips, invoices, petty cash slips, or legal documents that provide proof of asset purchases. The summary of the activity is aggregated on a monthly, quarterly, or annual basis; the individual transactions are grouped with other similar transactions and summarized by category (sales, inventory purchases, rent, utilities, wages, etc.).
Records should be well organized and kept in a safe place. For more detailed information, refer to Publication 583, Starting a Business and Keeping Records.
