Question

1. Rosemary does need to keep records that will allow the easy preparation of a tax return. But her primary concern should be in maintaining systems records that allow her to manage the business effectively.

1. What does it include?
2. What issues might be raised as problematic from your observation?

Answer 1

Everyone in business must keep records of the business transactions.Records are to be maintained not from the prospective of maintaining the tax return but rather to manage the business effectively.

-Maintaining records systematically will include the following-

• Maintaining daily transactions
• Converting the transactions to ledger and respective accounts as per the applicable financial reporting frameworj for the preparation of financial statement
• Keeping track of the receipts and payments
• Maintaining tax records etc

-An effective and systemattic business record will help i the following ways-

• Monitoring the progress of the business
• Preparing the FS
• Identify the source of receipts
• Projecting the tax liability
• Keeping track of deductible and non deductible expenses
• Preparing the tax returns
• Support items reported in tax returns

-Hence records to be maintained for the purpose of managing the business effectively , which will automatically include the tax return preparation in it.

-Following are the problems raised in maitaining a good systematic records-

1. It is very difficult to maintain systematic records by tracking each and every transactions.

2. Possible human errors may occure in maintaining the records

3. partial ommission or full ommission of important transactions may lead to payment of more tax

4. change in accounting framework policy may not be incorporated or it may be difficult to incorporate the accounting policy changes

5. Employees fraud and window dressing etc.

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