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.