Reasons Why Businesses Must Keep Track Of Taxes Collected And Paid
Keeping records of your business is important because it has several advantages. By maintaining the records, you will be able to prepare the financial statements whenever required for tax or other purposes.
You can also keep a note of the performance of your business, identify the source of income, determine which sector needs improvement, prepare your tax return statement, and find the way to reduce excess expenses.
On the whole, the business records help you to identify the areas where you are doing well and where you need to focus more to achieve the goal.
Particularly for the small business owners, the initial 1-2 years are usually the hardest. First of all, you have to decide what form of business will suit you the most. Then comes the most hazardous part – extensive record keeping. But this is mandatory for all kind of business, and you will also realize its advantages at every step.
You may find it difficult to maintain it. For this reason, the professional organizations like Khatabook come into play to take care of all finance-related issues that include paying GST, filing GST returns, accounts audit, how to download GST certificate, etc. With Khatabook, you will get rid of these hazards and concentrate on your business better.
Khatabook provides digital solutions to help you with the growth of your business. You will always have an update about the financial status of your business. You can keep track of debits and credits to all the suppliers and clients. You will be carrying this information along with you on your mobile device to have a stress-free business life, at least in this regard.
Benefits of Keeping Financial Records
Keeping all the records of your finances comes with a lot of benefits which are –
- The financial records show you the true scenario of your business and provide a comparison to the previous quarters or years. You will realize whether it is improving gradually or not and how you can run it better. You will have the accurate data for the tax submission and returns statement. The financial statements include both the income and loss records as well as the balance sheet based on which you can deal with the banks and other financial institutions to run your business smoothly.
- An income statement contains the profit and loss records for a certain period. And a balance sheet reflects your belongings, equities as well as liabilities on a particular date.
- You can track the basis on the assets. This basis will let you determine the sale or exchange of property.
- You have to furnish the necessary documents to file tax return claims. GST is the uniform taxation system of India introduced in the year of 2017. As a registered taxpayer, you must maintain every record related to your business.
- For online tax payment and claiming of the returns, emsigner for GST is an extremely useful tool. It allows you to sign the documents that you are furnishing in support of your claimants, digitally. This digital signature is encrypted to keep your information secure.
- To make estimated tax statements, you need to project tax liabilities during the first year of your business. This is the method of paying tax on income which is not withheld.
- You may receive money from multiple sources. The records will help to separate different type of sources which you need to distinguish, for instance between personal and professional receipts, also between taxable and non-taxable.
- If you keep track of financial records, it will be easy to get the deductible expenses. Without records, it would not be possible to include the expenses while filing GST returns.
- Keep all the records available at any point of time to produce them if any issues arise. If any discrepancy comes out on your GST return statement, you may have to furnish all the related documents to resolve the matter, failing which you might be penalized.
On the other side, a complete organized set of records will accelerate the process.
Records You Must Maintain As A Taxpayer Under GST
Every registered person must maintain the following records to avoid any mismatch.
- Amount of goods production
- Stock of goods
- Both the inward and outward supply of goods and services
- Input tax received
- Output tax paid or due
- Other related records
GST Accounting Entries
The newly launched taxation system GST will bring clarity in the goods and services sectors as it introduces a uniform tax across India instead of multiple taxes, unlike the traditional system. You might find it a bit complex and might need professional help for maintaining the records of different accounts.
Khatabook will help you out with the money related matters and taxation of your business. Record keeping will become easier as you will have everything you need about the suppliers and customers on your mobile phone or laptop/desktop.
Electronic Cash and Credit Ledger
There will be 3 ledgers under GST for every registered person or company. These will be generated automatically as soon as you register yourself and will be maintained electronically.
- Electronic cash ledger: This acts as the electronic wallet where you will add money for making payment when needed.
- Electronic credit ledger: The input tax credit will be reflected here. The account balance is only for tax payment.
- E-liability ledger: Total tax liability for a particular month will be calculated here.
As per the GST Act, every registered taxpayer must maintain the accounts book for at least 6 years or 72 months, counted for the last date of return filing for the financial year.
But in practice, it is recommended to keep all the records as long as you can for safety. Remember, sometimes the inability to produce the old tracks may be considered as a black spot on your account.
Consequences of Not Keeping the Records
Failing to maintain the proper records may lead to a penalty. It is onto the officer to determine the tax liability on such accounts. You will have to pay tax along with the penalty charge.
So, now you have got a thorough idea of why you need to track all the tax, both paid and collected and what can happen if you fail to do so.