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about e-ccounting
e-ccounting is a monthly
newsletter focusing on accounting tips and solutions.
Our mission is to educate our clients, students and
readers by offering these resources in response to
your ongoing questions.
It is our objective to
gather information and provide easy access for your
current and future needs.
Back-issues are
available on the accountrain website.
These tips are not complete answers to complex
questions. We therefore recommend, when in doubt,
contact the professionals or government
agency.
about accountrain
accountrain simplifies the client /
accountant relationship.
accountrain offers a unique
combination of knowledge and people-skills to solve
all your accounting needs.
accountrain specializes in the how's
and why's of accounting.
Is accountrain the right accounting
team for you?
Find out
more....
Pass It On !
Please forward this to anyone you feel may benefit
from some free accounting tips. They'll be
glad you did.
Sandy's Question Corner
Do you have an accounting question? Send it to us at
accountrain@magma.ca
Workshops:
accountrain is now offering a series of three
workshops. Take one, two or all three and save as you
learn. The informative and interactive format
guarantees a comfortable and fun learning
environment. The topics:
1. Understanding How to Read Financial Statements
- Who's interested in your reports and why
- Why there's more to the Income Statement than
just the "bottom line"
- What's so important about the Balance Sheet,
and
- Key accounts, definitions, ratios and samples to
review.
2008 dates: Sept 23rd, Nov
13th
2. Accounting 101 - for new and small business
- Review of common questions, including GST,
incorporating and many more
- Choices for maintaining bookkeeping
- Understanding government requirements
- Shortcuts, tips and organizing all that paper!
2008 dates: Oct 6th, Nov
13th
3. Year-end Prep & New Year Planning
- It's never too late to get organized
- Understand what's different including:
depreciation, accruals, deferred revenue and
prepaids
- How to choose accounting help
- Preparing for an audit, and how about avoiding an
audit!
- Learn to streamline your bookkeeping methods to
save time and money.
2008 date: Nov 25th
Fall dates have been scheduled. For more
information or to register, email
accountrain@magma.ca
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Business Scenario
- Buying versus leasing |
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When you own a business, what's the best way to
purchase a big ticket item, ie a vehicle or office
equipment, like a photocopier?
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| Answer |
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Although buying versus leasing can apply to many
items, the focus for this newsletter will be on vehicles
as this is the item we are asked about the most.
The quick and dirty answer depends on how much
you use your vehicle.
If you buy it and the loan is for four to five years, you
can expense a portion (or all) of it until it is paid off.
However, most people would continue to use the
vehicle for at least one or more years. Therefore for
any
additional years there would be nothing to expense.
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| Accounting Tip |
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Know what you get in the end:
If you own it, you have built equity.
If you lease it, you don't have anything to show for
it, however you can expense the payment for every
month. Also, you don't have to try and sell it.
If you choose to buy it out, understand what the costs
include:
Are there extra costs, ie mileage? (A
normal
lease offers 2,000 km per month.)
As well as repair
costs, who is responsible for the upkeep, extended
warranties and anything considered "excessive"
damages (and what is "excessive")?
Ensure you are clear on all these aspects before
finalizing your purchase .
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| Did You Know ? |
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Monthly payments are typically higher for a leased car,
as loans can be spread out for several years and at
very low
financing.
You can reduce your monthly lease payments by
paying a down payment, although one is not
necessary.
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For more Did You Knows? |
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| Definition |
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Capital Cost (also known as Fixed Asset)
Or, in layman terms, a big ticket item.
If you purchase an expensive item, ie a car, you must
capitalize it when you record the purchase.
What does that mean?
You can not expense the entire value in the year you
bought it. There are many categories, ie equipment,
computer, furniture, vehicle and software.
Each category has it's own rule on how much can be
expensed (depreciated / amortized) per year.
For example a car is 30% per year (with exception to
the first year, which is always 1/2, therefore 15%).
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For more definitions ... |
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| Sandy's Recommendations |
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Get an opinion from whoever helps you with your
accounting. They will know your situation best. In
other words, do not let the car dealership make
suggestions.
Many dealerships will have literature on
the options, make sure you understand all aspects
before making your decision.
True story:
I had a client who leased a car without referring to me
first, and after realizing it was not the best scenario for
the company, returned the car after six months. In the
end, it was a costly mistake.
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| Next Issue - Paying yourself (as a business owner) |
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Learn:
Different ways to pay yourself based on
how the business is doing
Pros and cons of each
What deductions are necessary
How to defer the taxes
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