Business & Professional Practice

Lesson 4 of 10

Bookkeeping, expenses, and deductions

Reliable bookkeeping helps a practitioner understand cash flow, meet filing duties, and make informed business choices. Record income and expenses promptly, separate personal and business transactions where practical, and keep supporting documents. A purchase is not automatically deductible simply because it is used at work. Tax treatment depends on current rules and the specific facts, so use a qualified tax professional when needed.

Key points

• Track all receipts, invoices, payment fees, refunds, and cash transactions.
• Reconcile statements regularly so missing or duplicated transactions are caught early.
• Common categories may include rent, supplies, education, insurance, and advertising; eligibility varies.
• Document business purpose and allocation when an item has both personal and business use.
• Avoid claiming personal expenses as business deductions and do not rely on informal rules of thumb.
• Plan cash reserves for taxes, renewals, repairs, and slower periods.

Key terms

Bookkeeping

Organized recording and classification of business financial transactions.

Reconciliation

Comparing records with statements to identify differences and errors.

Gross income

Business receipts before subtracting allowable expenses.

Deductible expense

An expense qualifying for tax deduction under rules applicable to the taxpayer.

Cash flow

Timing and movement of money into and out of a business.