How your bookkeeping can boost your tax deductions

Bookkeeping is the key way to bring one’s tax strategy in full circle. It’s the best way to know what is deductible and how to maximize your business deductions. Here is a checklist that make sure bookkeeping is maximizing travel, meals and entertainment deductions. Since these are the three ways where everyone doesn’t have restrictions to themselves. Everyone have to consider these 3 things as major constraints in bookkeeping in order to boost your tax deductions.

Get reimbursed for business expenses that you pay for personally.
Have you ever been to a restaurant that only takes cash? Or traveled in taxi that only accepts cash? Or have you misplaced your business credit card and had to use your personal credit card? These are just some examples where we have to pay our business expenses with personal funds. We could easily miss these expenses so keep an file handy and put all of your receipts in that file. So that you have got a handy report that you have spent from your personal fund.

Have separate account for code meals that are 50% deductible in order to keep them distinct from other expenses that are not subject to this 50% rule. Many times we could see just one meal account in the chart of accounts. The problem with this is that while meals are generally only 50% deductible, some meals are 100% deductible. The mistake that we see most often when reviewing a prospect's prior year tax return, is all meals are treated as only 50% deductible (because they are all coded to one account) and we don’t have any strategy to identify meals that are 100% deductible.

Always maintain your travel expenses separately from your meals and entertainment expenses. As business travel is 100% deductible so separate it out as part of your bookkeeping system. Otherwise, you will have to sort through that account at the end of the year, or worse, you may sometimes forget to sort through that account and everything in the account is treated as only 50% deductible!

Use a separate section in your online bookkeeping software to make notes about who, what, when, where, how much and the business purpose of your travel, meals and entertainment expenses. By proper bookkeeping it is easy to boost your tax deductions, particularly for travel, meals and entertainment. This is an area where deductions are regularly missed and not properly documented, but once you know the rules and use my system, you'll find more and more deductions.

Closing Books

First of all everyone need to know the exact meaning of closing book or closing entry in terms of accounting. Revenue, expense, and capital withdrawal accounts are temporary accounts which have to be reset at the end of the accounting period, so that they will have zero balances at the start of the next period. Closing books or closing entries used to transfer the temporary accounts into permanent accounts.

Closing book or closing entry should be done at the end of every fiscal year. After the closing entries have been prepared, the temporary accounts will reflect in retained earnings and an intermediate account called income summary is created from which revenues and balances are transferred to retained earnings account(capital). Dividend or withdrawal accounts should be closed to capital.



Numia, provides you easier way for closing your book, having 2 choices either you can close manually or automatically. You can manually close just by selecting yes in the “Require manual closing of books” option highlighted in the above screen shot. And it closes automatically if you choose no.

Following are the steps for closing of books :

• Select Company --> click preferences.
• Fill the details.
• Select Require manual closing of books as ‘YES’ if you want to close your entry manually.
• Default option will be set to 'NO' which automatically closes the account and adds new entry for the next financial year based on the fiscal month.

Profit & Loss Account

In Accounting , the term Profit refers to , A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity.It is calculated as :

Profit = Total Revenue –Total Expenses

Loss refers to , A negative difference between Total Revenue and Total Expenses. It is a condition in which a company's expenses exceed its revenues.



Profit is the incentive for business; without profit people wouldn't bother. So in business, Profit and Loss are monitored as a separate accounts. The Profit & Loss Account has three parts, The Trading Account , The Profit and Loss Account proper and The Appropriation Account.



The uses of this account is to measure profit , if the profit(loss) has been accurately calculated, this can then be used for comparison of business in the past . Profit & Loss Account can be accurately calculated with the help of Numia, Online Accounting and Bookkeeping software.

Reports can be viewed as charts , can be customized in Excel sheets , e – mailed and can be printed.

Customize Profit and Loss Account

Numia provides advanced features like Profit Analysis based on timeperiod , customers and also for various products.

Analyze your Profit and Loss more efficiently using Numia.biz .