Bookkeeping
If you're self-employed, meticulous accounting throughout your fiscal period is key to filing accurate income tax returns.
Method of accounting
For a sole proprietorship, you need to use an accounting method that reports your net business income properly. As a rule, you would use the accrual method, but if you earn commission income, you can also use the cash method.
| Method | When to report your income | When to deduct your expenses |
|---|---|---|
| Accrual | In the fiscal period you earn the income, regardless of when the money is received. | In the fiscal period you incur the expenses, regardless of when you pay them. |
| Cash | In the fiscal period you receive the money. | In the fiscal period you pay the expenses. |
Accounting software
There are numerous accounting software choices on the market. Be aware that we do not provide support for off-the-shelf software. Your accounting is your responsibility.
Keeping accounting records
Accounting records give you a running view of your business's financial position. They can be simple tables (commonly referred to as “income and expense journals”). See Accounting Records: Income and Expense Journals for examples of easy ways to report your income and expenses.