Imagine you own a small business—an organic products store. Every month, you purchase merchandise to restock your inventory and then sell those products to your customers.

To keep our finances organized, we maintain detailed records of all monthly income and expenses. This includes sales receipts, supplier invoices for purchased merchandise, and bank statements from our checking account.

By accurately recording every financial transaction in detail, we can precisely calculate how much money comes in and goes out of our store during a given period. This gives us a clear view of our business’s financial status at any time.

In addition, this approach allows us to prepare proactively for the annual tax filing with the IRS (Internal Revenue Service), the federal agency responsible for tax collection in the United States. By keeping all our accounting records organized and up-to-date, we can clearly and accurately present the necessary information to meet our tax obligations.