Assets. Assets are the property, such as machinery and furniture you own and use in your business. You must keep records to verify certain information about your business assets. You need records to figure the annual depreciation and the gain or loss when you sell the assets. (Remember than when you expense an asset, it now belongs to the business, not you personally. Any time you dispose of an asset, you must account for it.) Your records should show the following information.
- When and how you acquired the asset
- Purchase price
- Cost of any improvements
- Section 179 deduction taken
- Deductions taken for depreciation
- Deductions taken for casualty losses, such as losses resulting from fires or storms
- How you used the asset
- When and how you disposed of the asset
- Selling price
- Expenses of sale
The following documents may show this information.
- Purchase and sales invoices
- Real estate closing statements
- Canceled checks
What if I don't have a canceled check? If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. These include checking account statements and credit card statements. Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. You should also keep other documents, such as credit card sales slips and invoices, to show that you incurred the cost for a business purpose. For instance, if you are claiming a meal deduction for taking a business client to dinner, it is a good idea to write the clients name on the receipt and a few word description of what was discussed.