If we had to make an informed guess about how many times our small business clients have asked us one of the questions below, we’d say nearly 70% of the times.

It doesn’t matter if they run a small bar in Fort Lauderdale or a private clinic in Oakland Park, they bring up the exact same things.

These are the top three tax and accounting questions we get from our clients, and this is what we tell them every single time:

“Why doesn’t my income statement match my balance sheet?”

Well, because they aren’t meant to.

Your income statement and balance sheet convey two very different sets of information.

• An income statement is a summary of your business’s financial performance over a specific accounting period. It contains information about your revenue and all your expenses.
• A balance sheet is a summary of your business’s current financial position. It contains information about your assets, liabilities and equity at a particular point in time.

“Do I need to keep every single business invoice or expense receipt?”

Yes.

Maintaining documents such as invoices, receipts, sales slips and canceled checks will ensure accurate recordkeeping. This in turn will serve to help you back up your entries should a need arise in the future. However, we’d advise you to maintain an electronic record of the transactions rather than a manual one. Paper based documents can get easily misplaced or damaged, in which case you can end up losing the evidence.

It’s worth mentioning here, though, that you don’t really need those invoices and receipts for accounting purposes; a credit card or bank statement is all the documentation your accountant will need to make the entries.

“Can I pay for my personal expenses through my business credit card or bank account?”

Yes, you can. However, you’re advised not to.

This is because it can be hard to keep track of your actual business expenses when you don’t keep your personal expense payments separate from your business account.

Why make things complicated for yourself and your accountant?

Moreover, if you’re running your business in a partnership, you can find yourself in an awkward position having to justify to your partner how that foreign family trip expense came on the income statement.

What particular subjects about tax and accounting do your find confusing when it comes to running your small business? Let us know in the comments section below; we’d love to hear from you and help you out. If you are looking for accounting and business solutions, then contact A&B Accounting and Business solutions.

For further reading: How small businesses can save on taxes