Three Types of Records a Retailer Should Keep in Case of an Audit

According to a CPA Practice Advisor article, there are three types of records you should recommend your retail clients to keep in case of an audit: sales records, purchase records, and POS (point-of-sale) records.

1. Sales records

• A journal of non-cash transactions affecting accounts payable
• A journal on cash transactions, including any check transactions
• Sales slips, invoices, receipts, cash register receipts and other comparable documents for original sales
• Memorandum accounts, lists and other documents concerned inventories, fixed assets and prepaid items
• Ledger to which these journals and other records have been posted

2. Purchase records

• Documentation of purchases subject to state and local taxes
• Documentation of purchases for resale, such as inventory and raw materials
• List of purchases exempt from state and local taxes
• Documents substantiating expenses and cost of goods sold
• Records reflecting the business purposes of purchases
• Proof that sales and use taxes have been paid

3. POS records

• Individual items sold or purchased
• Date of sales or purchase
• Sales or purchase prices
• Sales tax due
• Vendor names
• Invoice numbers and amounts
• POS identification numbers or purchase orders
• Methods of payment

"Clients who don’t adhere to state record keeping requirements run the risk of being penalized by auditors," the article states.