What type of documentation is essential for claiming a business expense deduction?

The necessity of receipts, invoices, and bank statements for claiming a business expense deduction is grounded in the requirement for accurate record-keeping and substantiation of expenses. Receipts provide proof of actual purchases made in the course of business, while invoices document services rendered or goods provided. Bank statements further offer an additional layer of verification by showing the actual monetary transactions that took place.

This documentation is crucial not only for substantiating deductions if audited, but it also supports the overall accuracy of financial reporting. Each type of documentation serves to ensure that the expense claimed aligns with legitimate business activities and can be verified by tax authorities. This thorough record-keeping approach is in stark contrast to relying on estimates, verbal agreements, or incomplete documentation, which would not provide the necessary proof for the deductions claimed.