Documenting Your Journey
http://www.onlinewbc.gov/docs/finance/records.html 

Records to Keep


BASIC TYPES OF BUSINESS RECORDS

For a small business, the business checkbook is the main source for entries into your accounting system. But what else do you need to keep? Although, there are no legal requirements, you will need to keep sufficient records to support your tax returns.

Income.  You need to keep records that support the amounts and sources of income. Examples include:

Purchases & Direct Expenses.  You need to keep records that support the materials and supplies for your products and services. Examples include:

Indirect Expenses.  You need to keep records that support overhead and other costs of doing business. Examples include:

Assets.  You must keep records for the property and equipment that you use in the business. Information to support the depreciation expense or any gain or loss if you sell the asset includes:


HOW LONG DO I KEEP THIS STUFF?


The answer to the above question is, "you must keep your records for as long as you need them for the tax agency or other business purposes". Now you are certainly asking yourself, "what in the world does that ambiguous answer mean?" Certainly the IRS provides guidelines, but who understands advice such as "... keep records that support a tax return until the period of limitations for that return runs out."?? And couldn't everything else fall under the category "other business purposes"?

Certainly, you don't want to keep everything -- this just makes it that much more difficult to find something when you do need it. And for the small business owner, storage space is often at a premium and you will want to avoid using rented storage facilities if you can.

So then, what is the real answer? Assuming that you have properly completed and filed your tax return (keep records that support your tax return for 10 years), the following table provides general guidelines for keeping many business records:

 

CATEGORY TIME
Accident reports/claims (settled cases) 10 years
Accounts payable ledgers and schedules 10 years
Accounts receivable ledgers and schedules 10 years
Audit reports Permanently
Bank reconciliations 2 years
Bank statements (see also "cancelled checks" below) 3 years
Capital stock and bond records: ledgers, transfer registers, stubs showing issues, record of interest coupons, options, etc. Permanently
Cash books Permanently
Chart of accounts 10 years
Checks (canceled - see exception below) 10 years
Checks (canceled - for important payments, i.e. taxes, purchases of property, special contracts, etc. Checks should be filed with the papers pertaining to the underlying transaction.) Permanently
Contracts, mortgages, notes, and leases (expired) 10 years
Contracts, mortgages, notes, and leases (still in effect) Permanently
Correspondence (general) 2 years
Correspondence (legal and important matters only) Permanently
Correspondence (routine) with customers and/or vendors 2 years
Deeds, mortgages, and bill of sale Permanently
Depreciation schedules Permanently
Duplicate deposit slips 2 years
Employment applications 3 years
Employment tax returns 4 years
Expense analyses/expense distribution schedules 10 years
Financial statements (year-end other optional) Permanently
Garnishments 10 years
General/private ledgers, year-end trial balance Permanently
Insurance policies (expired) 3 years
Insurance records, current accident reports, claims, policies, etc. Permanently
Internal audit reports (longer retention periods may be desirable) 3 years
Internal reports (miscellaneous) 3 years
Inventories of products, materials, and supplies 10 years
Invoices (to customers, from vendors) 10 years
Journals Permanently
Magnetic tape and tab cards 1 year
Minute books of directors, stockholders, bylaws, and charter Permanently
Notes receivable ledgers and schedules 10 years
Option records (expired) 10 years
Patents and related papers Permanently
Payroll records and summaries 10 years
Personnel files (terminated) 10 years
Petty cash vouchers 3 years
Physical inventory tags 3 years
Plant cost ledgers 10 years
Property appraisals by outside appraisers Permanently
Property records, including costs, depreciation reserves, year-end trial balances, depreciation schedules, blueprints, and plans Permanently
Purchase orders (except purchasing department copy) 1 year
Purchase orders (purchasing department copy) 10 years
Receiving sheets 1 year
Retirement and pension records Permanently
Requisitions 1 year
Sales commission reports 3 years
Sales records 10 years
Scrap and salvage records (inventories, sales, etc.) 10 years
Stock and bond certificates (canceled) 10 years
Stockroom withdrawal forms 1 year
Subsidiary ledgers 10 years
Tax returns and worksheets, revenue agents' reports, and other documents relating to determination of income tax liability Permanently
Time books/cards 10 years
Trademark registrations and copyrights Permanently
Training manuals Permanently
Union agreements Permanently
Voucher register and schedules 10 years
Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc. for travel and entertainment) 10 years
Withholding tax statements 10 years

Confused by terminology used in the above table? Check out Bookkeeping and Accounting for Small Business or the Business Terms Glossary in the Online Women's Business Center.
 

OTHER SOURCES OF INFORMATION

Internal Revenue Service Pub.583 "Starting a Business and Keeping Records"  This guide is an excellent resource for people starting a business.  In addition to basic federal tax information for starting businesses, it contains record keeping tips, a sample record keeping system, including sample forms!  This guide can be downloaded from the IRS and is a must for all new business owners.

(The Woman's Business Project, Coastal Enterprises, Wiscasset, Maine 4/97)

 

Copyright Information
Title:  Documenting Your Journey
Author:  N/A
Originating URL: http://www.sba.gov/library/pubs.html & http://www.sba.gov/map.html
Document URL: http://www.onlinewbc.gov/docs/finance/records.html
  Small Business Administration (SBA) does not object to anyone linking to us as long as the descriptive words of our site are accurate and not misleading and do not misrepresent an unofficial relationship between the linking site and SBA. SBA prefers that you link to our information, rather than "capturing" it because their information changes hourly and a small business person may be misled with outdated information. No permission is needed from us either verbally or in writing to link to us provided the above is followed. ( http://www.sba.gov/hotlist/linkguide.html). This website has chosen the "capturing" method due to the frequent re-arrangement of URL path names by SBA.gov. The information herein is for education purposes only and should not be interpreted as "up to date."
 

Certain materials herein are included under the fair use exemption of the U.S. Copyright law and have been prepared according to the educational multimedia fair use guidelines and are restricted from further use. This work may be protected by further copyright, reproduction and distribution (in violation of United States Copyright Law).

Redistributed with permission.