The IRD requires proper books and records for businesses, including daily sales, purchases, expenses, inventory and wages where applicable. Sales receipts are not the same as chargeable profit.
Start with gross sales, not bank deposits alone
Imagine a shop collecting TT$12,000 in sales in one month. The bank statement may show a lower figure because some customers paid cash, bank fees were deducted or part of the receipts remained in a till. A sales book should record the business's transactions at the correct dates, supported by receipts, invoices or another appropriate system. That gives a stronger starting point than estimating revenue from the current account balance.
The IRD's small-business guidance describes keeping business records in English and in Trinidad and Tobago currency, with a daily sales book and appropriate storage. A business selling through Facebook, WhatsApp, cash on delivery and a market stall should reconcile all channels to the same records. No sales channel is exempt from the practical need to track what customers paid.
Separate stock from operating costs
In a retail business, purchases of goods intended for resale are recorded in a purchases book, with stock control used to determine inventory and the correct cost of sales. Other expenses such as delivery, rent, utilities or advertising require an expenses record. A business should not treat every payment for unsold inventory as though it were an expense of goods already sold without considering the proper accounting method.
For a simplified example, assume TT$12,000 sales, TT$4,200 cost of goods sold, TT$900 deliveries and TT$1,400 other eligible operating expenses. That produces a TT$5,500 operating balance before any further adjustments, taxes or other accounting entries. This example depends on the TT$4,200 being the cost of stock sold, rather than a payment for inventory that remains on the shelves.
Keep usable evidence for deductions
Retain supplier invoices, receipts, contract records, payment confirmations and statements showing why each cost relates to the business. The IRD explains that allowable business expenses are incurred in producing the business's income. Personal and private expenses do not become business deductions because they were paid from the same bank account or recorded in a spreadsheet.
If the proprietor uses one mobile phone for business and family calls, identify an evidence-based business-use portion. Rent, electricity and vehicle costs may also contain mixed personal and business use. The IRD provides guidance on apportionment. Record the calculation and underlying invoices so that an accountant or tax officer can understand how the amount was determined.
Stock and wages create additional obligations
The IRD's guidance includes stock sheets, with an inventory at the end of the financial period. Count actual stock, record damaged or missing items and use a consistent valuation approach. Inventory protects cash flow: buying too much stock can tie up money even when accounting profit looks positive. Keep purchase prices, selling prices and quantities accessible.
When employees are hired, maintain wages and salaries records, including casual workers where applicable. Record income-tax, health surcharge and NIS deductions as required. If wages are paid in cash, the IRD guidance discusses employee certification or acknowledgements of payments in salary records. Payroll and business profit records need to agree rather than being reconstructed from messages at year-end.
Build a monthly review routine
At the end of each month, total sales by channel, reconcile bank and cash records, review unpaid customer invoices, count or value stock as appropriate, and classify expenses. Compare the month with the budget and the same period in the prior year where available. Investigate the largest differences while people still remember what happened.
For a small service firm, monthly reviews might reveal that travel and subcontracting cost more than expected, leading to a change in how quotations are prepared. For a retail shop, it may reveal slow-moving stock or high delivery costs. Recordkeeping should improve decisions throughout the year as well as support tax compliance.
Calculate cost of sales using the stock records
A retail owner buys 100 items at TT$50 each. During the month, 60 items are sold and 40 remain in stock, assuming no shrinkage, returns or other adjustments. The stock bought cost TT$5,000, while the direct cost associated with the 60 items sold is TT$3,000. Recording the full TT$5,000 as the period's cost of goods sold without considering remaining stock can distort the month's trading result. The actual accounting treatment follows the relevant records and tax rules.
If the 60 items were sold for TT$100 each, revenue would be TT$6,000. Deducting an illustrative TT$3,000 cost of goods sold leaves TT$3,000 gross profit before rent, deliveries, wages, utilities, bank fees and other costs. The owner should also compare the book stock of 40 units with the physical count and investigate missing or damaged stock. A simple stock sheet can make this comparison visible.
At month-end, attach the suppliers' invoices, sales totals, inventory count and explanations of stock adjustments to the accounting records. This method helps owners decide whether products are priced well and whether cash is tied up in items that are not selling. It also supports the records the IRD expects businesses to maintain.
Action checklist
- Record every sale daily, including cash, online and bank transfers.
- Keep a purchases record, expense evidence and financial-period stock information.
- Separate private spending from business transactions and document any legitimate apportionment.
- Maintain wages and deduction records if staff are employed.
- Reconcile sales, cash, inventory, accounts and payments monthly.
Questions people ask
Is revenue the same as profit?
No. Sales are the starting point; costs and proper accounting adjustments determine the result.
Must a small sole trader keep formal books?
The IRD states that persons carrying on trade or business must keep proper records and books of account under the Income Tax Act.
Can household expenses be deducted in full?
A private expense is not deductible simply because the owner also works from home. Genuine business-use portions may be considered under the applicable rules.
Official references
Check the responsible authority for instructions that apply when you file. These sources informed this guide:
Related BizReg guides
What BizReg can help with
BizReg Consulting can help with sole trader registration and preparation for bank documents or cash-flow projections. A qualified accountant should assess deductions and tax calculations.
View BizReg services Ask BizRegGeneral information for Trinidad and Tobago, researched 21 October 2026. This article does not replace individual legal, tax or accounting advice. The relevant authorities decide applications and requirements.