Robert is running a Sole Proprietorship; he brought his shoebox to me, which was full of bank statements and receipts so I could compile his income and expenses and do his taxes.
"Do you have any invoices for the sales you've made? or Sales records?" I asked.
He stated, "Don't worry about that; simply add up all of the deposits in the bank."
I started preparing the tax return once I acquired the necessary data.
When I compared the results to those of the previous year, I was shocked by the findings.
It seemed odd that he had almost quadrupled his revenue, given that he runs a service firm and does not employ more people. That was not the case.
In addition, each day consists of the same twenty-four-hour period for every one of us.
As a consequence of this, I investigated the bank deposits and found two bank-ins, one for the amount of RM20,000 and the other for the amount of RM50,000. They didn't look like sales.
The rest of the deposits were under RM5,000, and unlike these two, they weren’t nice round numbers like these two.
I decided to call Robert.
"Oh yes," he said. “My sister lent me twenty thousand. "And the other one... well, let me just think about that one for a second. Yeah. To finance the purchase of another machine, I took out a loan from a finance company."
"Well, Robert, you don't have to worry about paying taxes on those loans. They are not required to be included in your sales."
"They're not, are they? However, I used the money for my business."
"Doesn't matter, Robert. They are not sales but rather loans."
"Did you know that if I had let that tax return fly out the door, you would have paid around RM10,000 additional taxes that you did not have to pay?"
Robert was shocked. Then grateful.
Accounting is highly important for any business setup, as it helps to measure the true failure or success of a company. In addition, it is also helpful for businesses to maintain their financial records and develop a budget for the functioning of their company.
Let's take a look at the top five advantages of maintaining proper accounting records:
Smart decisions making
Better management of cash
Timely payment of bills
Reduces risks - able to detect embezzlement and fraud in your business
Helps with tax payments - Additionally, your accounting records are important when you have an audit from the Inland Revenue Board of Malaysia.
Comments