Keeping Business Records
What are Business Records?
A business record is a documentation of the transactions that a business carries out in a given period. This documentation is normally in the traditional form of records written down on paper; it may also be electronically kept on say a computer, or both.
Records include but are not limited to accounting and other ﬁnancial documents kept in an organized way.
You are required to maintain adequate records if you are carrying on a business or engaged in a commercial activity. These records must provide sufﬁcient details to determine your tax obligations and entitlements. They have to be supported by source documents to verify the information in the records.
What kind of records do I have to keep?
A business has to keep records relating to all its transactions, it is important to always have records that are dated, so that you can understand which records relate to what period.
Types of records one should keep include:
- Income statement (List of Receipts and Payments).
- Balance sheet.
- Import schedules.
- Bank statements
- Appointment Letters
- Bills (e.g. Utility Bills).
- Stock records.
- List of Assets (Assets Register).
- Many other records and/or documents relevant to your business such as Receipt-books, Invoices, Debtors and Creditors should be kept.
Some detailed illustration of records you should keep:
(a) Income Records
Keep track of the gross income your business earns.
Gross income is your total income before you deduct the cost of goods sold and expenses.
Your income records should show:
- The date
- Source of the income
Record the income whether you received cash, property, or services. Support all income entries with original documents. Original documents include:
- Sales invoices
- Cash register tapes
- Fee statements
- Contracts, and so on
(b) Expense Records
Always get receipts or other vouchers when you buy something for your business.
The receipts have to show:
- The date of the purchase
- The name and address of the seller or supplier
- The name and address of the buyer
- A full description of the goods or services
Sometimes, however, suppliers may not provide receipts. In this case, write the information in your records. Show the name and address of the supplier, the date you made the payment, the amount you paid, and the details of the transaction.
Make sure the seller describes the item on the receipt. However, sometimes there is no description on the receipt. In this case, you should write what the item is on the receipt or in your expense journal.
How often can I keep records?
An accurate record of every transaction must be made whenever a business transaction occurs. It is recommended that documentation of such transactions is made immediately they take place, this eases the work and enhances accuracy and also avoids omissions that may occur as a result of forgetting certain items due to passage of time.
Why is it important to keep records?
The importance of Record Keeping cannot be overemphasized, the beneﬁts are limitless.
Here are some beneﬁts of keeping complete and organized records:
- Keeping good records will remind you of expenses you can deduct when it is time to do your income tax return.
- When you earn income from many places, good records help you to identify the source of income. Unless proper records are kept, you may not be able to prove that some income is not from your business, or that it is not taxable.
- Good records will keep you better informed about the past and present ﬁnancial position of your business.
- Good records can help you budget, spot trends in your business, and assist to get help from banks and other lenders.
- Good records can prevent problems you may run into if we audit your income tax returns.
An example of how you can beneﬁt by keeping proper records;
Keep a record of the properties you bought and sold. This record should show who sold you the property, the cost, and the date at which you bought it. This information will help you calculate your claim for initial allowances, capital deduction allowance and other amounts.
If you sell or trade a property, show the date you sold or traded it and the amount of the payment or credit from the sale or trade in your record books
Keep a record of your daily income and expenses. URA does not issue record books or suggest any type of book or set of books. There are many record books and book keeping systems available.
For example, you can use a book that has columns and separate pages for income and expenses.
Keep your records, along with your duplicate deposit slips, bank statements, and cancelled cheques. Keep separate records for each business you operate.
If you want to keep computerized records, make sure they are clear and easy to read.
If you do not keep the necessary information and you do not have
any other proof, URA may have to determine your income using other methods. We may also reduce the expenses you deducted.
Legal requirements – records and information collection
Part IV of the Income Tax Act (Cap.340) imposes certain obligations and duties upon anyone carrying on business in Uganda. Hereunder are some of the sections of the act that spell out these requirements.
Accounts and Records (S129):
- Unless otherwise authorized by the Commissioner, a taxpayer shall maintain in Uganda such records as may be necessary to explain the information provided in a return or in any other document furnished in terms of section 92 or to enable an accurate determination of the tax payable by the taxpayer.
- The commissioner may disallow a claim for a deduction if the taxpayer is unable without reasonable excuse to produce a receipt or other record of the transaction or to produce evidence relating to the circumstances giving rise to the claim for the deduction.
- The record or evidence referred to in this section shall be retained for ﬁve years after the end of the year of income to which the record or evidence relates.
Books and Records not in English Language (S 133);
Where any book, record or computer stored information referred to in Sections 129,131 or 132 are not in English, the Commissioner may, by notice in writing, require the person keeping the book, record or computer stored information to provide, at the person’s expense, a translation into English by a translator approved by the Commissioner.
Failure to maintain Proper Records (S 139)
A person who fails to maintain proper records under this Act commits an offence and is liable on conviction to:
- Where the failure was deliberate, a ﬁne not less than ﬁfteen currency points or to imprisonment for a term not exceeding one year, or
- In any other case, a ﬁne not exceeding twenty-ﬁve currency points.
Penal Tax in relation to Records
Record keeping is a legal requirement imposed on any person carrying on business in Uganda.
The Income Tax Act 1997 Section 152 spells that ‘A person who deliberately fails to maintain proper records for a year in accordance with the requirements of this Act is liable to pay a penal tax equal to double the amount of tax payable by the person for that year’.