The importance of asking for an official receipt on every purchases or payments made is not a common knowledge to individuals or business owners.
It is necessary that for expenses to be claimed as deduction to income tax, it should be substantiated by Official Receipts/Invoices issued by third-party establishments.
Some Benefits of always Having an Official Receipt of Your Purchases
- Completeness of Records
One of the basic benefits of asking official receipt is completeness of accounting records to support existence of recorded transactions. Without an official receipt, your accounting records is incomplete which can be risky in the long run.
- Claim as Deduction or Refund
If you ask for an official receipt on your purchases or payments, you can validly claim it as expense and use it as deduction to sales. If in case you are VAT registered and your input tax (vat on expenses) exceeds output tax (Vat on sales), you may claim for refund on the excess or difference.
- Decreases Tax Payments
Another importance of asking for an official receipt is that it can be used to legally minimize or decrease tax payable. Since the official receipt can be use as expenses which is deducted to sales, it will in effect minimize your company’s tax payments due to lower net income.
- Minimizes Audit
One of the major reasons for audit is lack of documents, such as Official receipts, to support the existence of the transaction. Asking for official receipts and properly filing it will minimize the risk involving audit.
- Hard Evidence
Last but the most important benefit of asking for an official receipt is having a hard evidence to support the existence of the transaction recorded. This is very important in the long run of the business.