Financial Records for tax purposes

Record keeping as required by law

The Tax Procedures Act of 2015 requires you to keep financial records for five years from the end of the reporting period in any official language (English or Swahili). The revenue authority can go beyond five years because of suspected fraud or deliberate manipulation to evade taxes.If the documents are in the official language, the Commissioner might require you to translate them into English or Swahili at your own expense.

Nature of records to be kept

The records include receipts and expenses, goods purchased and sold, and accounts, books, deeds, contracts, and vouchers which, in the opinion of the Commissioner, are adequate for computing tax. For Income Tax Act, the carrying on of business includes any activity giving rise to income other than employment income.

The documents required by law should ascertain a person’s tax liability. The unit currency for the books of accounts,records,paper registers, tax returns, and tax invoices are to be in Kenya shillings.

Other than taxes, why should you keep financial records

Financial records are also critical for your business. Records will enable you to provide information to assess the profitability of your business,access funds, and prevent frauds and thefts of the business resources.They will help you manage your cash flows, make proper business decisions, save you time, energy, and costs of handling business and comply with various laws.

Appropriate records will show if your business is profitable and on a good growth trajectory or not. Banks and all financiers require records, both historical and forecasts determine if you are indeed credit worth for any capital injection or loans. You will need documents to make decisions on your business. It is impossible to know which profitable or loss-making products without available information.With the accurate, readily available information, you will save a lot of time and money when it comes to dispute resolutions with various authorities, including tax, labor, and creditors, where you are required to prove. Tax and financial statement audit become easier with proper records readily available.

Keep simple, accurate, readily available, and affordable financial records using simple tools like excel and manual books if you can notafford a system. You can not count what you can not number.

 

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