All business owners are required to maintain a system that accurately records all of the business transactions and provides related financial reports, including the results of the business operations. Specific records and reports must also be maintained to support the reported transactions and provide documentary evidence to support the daily transactions, financial statements, and tax returns. These reports will also provide the information which an auditor will require.Â
The accounting  reports will include the Balance Sheet, the Income Statement (Profit & Loss), the Statement of Cash Flows, the General Ledger, and payroll reports. The business owner should use all of these reports to determine the financial course of the business (where it was in the past, where it is now, and the projected direction that is in progress now). If you do not have the background or knowledge to analyze and comprehend the information in the financial reports for your business consult with someone who can assist you, i.e. your CPA, a mentor, an associate, or colleague, etc.
The broad IRS guidelines for these requirements are presented below. I would also recommend that you read the related IRS publications which provide more definitive guidance: (more…)