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Accounting records, including invoices and payment receipts, are essential for tracking financial transactions and maintaining accurate ledgers. They are necessary for tax purposes and can be kept manually or electronically using accounting software.
An accounting record is any type of electronic or printed document that provides information about the financial status of an individual or entity. Records of this type are used to create more detailed accounting records, such as ledgers, journals, and other types of ledgers. The main function of these documents is to create an accurate history of all financial transactions related to a given period of time, including income received and disbursements made for relevant expenses. Along with money transactions, these account books also allow you to determine the balance between assets and liabilities.
Various documents are included as part of the process of preparing and maintaining books of accounting records. Invoices issued by a company are one of the fundamental documents that are recorded and tracked in accounting books and journals. Invoices allow you to track potential revenue that the business can reasonably anticipate. By entering invoices and invoice amounts into ledgers, it is much easier to apply checks or other forms of payment that customers remit when and when they arrive and are ready to deposit into a bank account.
Invoices related to purchases made by a business are also essential to maintaining accurate ledgers. As with invoices issued by a company, those that are received must be recorded in accounts payable records, making it easy to establish a schedule for issuing payment for those invoices. The check or form of payment used to settle the balance on those invoices is also considered an accounting record and is generally recorded in accounts payable along with the corresponding invoice.
All monetary transactions related to the operation of the business are considered accounting records of one kind or another. Both manual and electronic copies are kept on file, making it much easier to verify journal entries and ensure all records are in the correct order. When generally accepted accounting principles are followed, it is much easier to retrieve proper asset records, liability records, and any subsets of those records that relate to any accounts payable or receivable transaction.
Maintaining accurate accounting record books in some form is often required for tax purposes. This is true for both individuals and businesses. Not keeping copies of essential supporting documents can often create problems if a tax audit is called, and can result in certain deductions being disallowed for lack of documentation. For this reason, many individuals and businesses use accounting software to keep all entries in order, while also maintaining copies of checks, invoices, and other supporting documents that support the entries made in the ledgers.
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