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A receipt is a written proof that something valuable has been transferred from one person to another. Known from day-to-day shopping, where receipts are given in the acknowledgement of a purchase of goods and services, they also confirm business to business and stock market operations. For example, futures contracts given to investors and traders as a delivery instrument, basically serve a receipt function. They document the purchase and give its holder the right to exchange them for the specific asset at the date of expiration.

Why keeping Receipts is important

The primary function of receipts is a proof of ownership transition from one person to another when the two parties transact. They typically include such facts as the seller and buyer’s data, item purchased, its price and the date of actual payment. This information is valuable for businesses and legal bodies, which gives grounds for the multiple ways of use of receipts. For instance, receipts are commonly demanded by retailers or producers when their customers want to return or exchange a purchased item. Some manufacturers make use of receipts as something their customers can claim on warranty with. This is fairly reasonable as it provides a reference to the date of issuance, or purchase.

Keeping receipts for tax audits. As a proof of financial transactions, receipts are collected and used by businesses in reporting to the IRS for corporate taxation. Not all the documents, however, are IRS approved. They can be treated as valid as long as they present a clear summary of all transaction details.

The U.S. Internal Revenue Service (IRS) listed the types of documentation to be retained for business expense reports:

  • Gross receipts, reflecting the income you have received from your business in the given time, such as business books, cheque books, cash register tapes and other forms of sales record.
  • Receipts for expenses, which includes all purchases of materials put into production of the goods to be resold after processing. The documents include bills, invoices, canceled cheques or any other documents that carry the following information: payee, amounts payable and proof of payment or electronic money transfer.
  • Cash register tape receipts.
  • Bank statements.
  • Invoices.
  • Petty cash vouchers.

The various forms of Receipts

Historical milestones. Farmers and merchants of ancient Egypt are thought to be the first ones to use receipts for tax audits. In order to protect themselves from tax exploitation, Egyptians began to capture all their transactions on papyrus as the most available writing material. The value of receipts was then noticed and enhanced by the British, who brought it to the public through mass printing in the industrial revolution. They used printing presses to produce bank cheques with the bank logo and all the required data. Today, thermal printing, which has proven to be the cheapest way to produce receipts, still remains the most common printing technique. However, printed forms of receipts are generally becoming a thing of the past, as more and more businesses begin to use their electronic versions.

Digital Receipts era. 1997 was the starting point of digitalisation of the tax procedures. IRS officially approved the use of digital receipts and if not standardized the documentation to be filed but outlined the main principles that apply to it: the documents used for accounting must provide accurate data, suit for long-term storage and duplication and consist of retrievable pieces.

While digital receipts are undoubtedly a more durable and convenient way of recordkeeping than hard copy books, they can leave you with nothing to present to the IRS if your hard drive fails. Therefore, it is recommended to use cloud storage for digital accounting, so that you have no issues reaching it any time. 

Receipts can be handled digitally with the help of the many digital tools and programs. A desktop scanner can capture your paper receipt printouts for an electronic accounting system or bookkeeping app. The modern technologies aimed at tax reports include features for organized storage of files, automatic document filing and data integration into specialized accounting software.

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