Substantiation

Substantiation refers to the process of providing evidence or support for claims made in financial statements or tax filings. This involves gathering and maintaining documentation that verifies the accuracy, legitimacy, and compliance of transactions and deductions claimed by an individual or business.

In accounting and taxation, proper substantiation is crucial for ensuring that expenses are valid and can be justified in the event of an audit. Examples of substantiation include receipts, invoices, bank statements, and other records that confirm the details of a financial transaction. For instance, if a business deducts travel expenses, it must provide travel itineraries, hotel bills, and receipts for meals to substantiate those deductions.