How does book keeping works?

Question

How do book keeping works? Why do you have to turn in all your receipts on what you buy for your buisness? Can you please help if you know anything! Thank you

Why do you have to turn in a lla the recieopts? Do you have half of the money back in your income taxes.. or what?? I really don't understand the IRS thing.. pklease help!! :D thank you !!!

Answer 1

Expenses are tax deductible and if there are no receipts kept, the IRS will not allow the deductions, and you will be taxed on the money you spent.
Bookkeeping is simply a way to track the incoming money and the outgoing money, with the latter being categorized as to what it was spent for, in order to be able to get credit for taxes not due (for expenses) or capital outlays, that can be depreciated over time.

Answer 2

The purpose of bookkeeping is to keep a record of all the income and all the expenses for a business so that it can be accurately determined whether the business is making a profit or loss. Taxes are calculated on the difference between expenses (all those receipts) and income and people who might loan you money or buy the business want to see, in standard form, what you have been doing. You should also want to fine tune the business records so they tell you where income is coming from and where expenses are going. If you are making $2,000 from waxing floors and spending $4,000 a year on supplies and repairs then you might want to drop that activity and put the time and expense money into washing walls. Part of bookkeeping is rules for dividing up big expenses. For instance, a floor waxing machine that costs $4,000 is not charged against income for the month or year in which it is purchased, but is depreciated over the life of the waxer, perhaps 5 years, to show its proper effect on your business (you might sell it after 3 years, for example.)