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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.
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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.
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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
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.
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!
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.
Limited seating, for more information or to register,
email accountrain@magma.ca
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Business Scenario
- Business use of Car Expenses |
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I have a home based business, how much of my car
can I write-off?
As mentioned in the March issue discussing home
expenses, let's re-word the question. What you
actually should be asking is: What can I expense?
When accountants hear the word write-off it usually
pertains to transferring an aged (old) receivable to a
bad debt.
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| Answer |
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The first step is deciding how much of your car
(expenses) represent earning income for your
business.
There is one "real" method but many people have a
difficult time as it involves tracking each trip's actual
mileage.
Most people choose a conservative (see the definition
section) percentage based on estimating how much
mileage was used for business versus personal.
There is no right amount, as long as you feel you can
justify the percentage.
Once the percentage has been established, these are
the items you can expense:
Monthly loan or Lease payment
Gas
Repairs & maintenance (examples: oil changes,
car washes, snow tires, to name a few)
Insurance
License Plate Renewal
How does one record Car Expenses on their
Income Tax?
The business portion of car expenses are recorded
on your General Tax Return, in a specific section of the
T2124 (Statement of Business Activities)
form.
If you lease your car, there is an additional lease
section to fill out.
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| Accounting Tip |
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Separate parking receipts and parking tickets; if they
pertain to the business. Include them in travel
expense, as they should be recognized as 100%
expense.
Group like items together and total. For example,
instead of recording each gas receipt, add up the total
gas receipts for a month. Staple together and use the
total.
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| Did You Know ? |
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Unlike house related costs, the percentage of car
expenses should vary from year to year (seeing as it's
based on actual mileage used for business.)
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For more Did You Knows? |
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| Definition |
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GAAP
In March's issue we introduced one of the
Generally Accepted Accounting Priniples,
Consistency.
Conservatism is another principle.
Text Book Definition: "The concept holds that where
acceptable alternatives for an accounting
determination are available, the alternative having the
least favourable outcome (immediate influence on
owners' equity) should be selected." (taken from the
3rd Canadian Edition of Intermediate Accounting by
Welsch, Zlatkovich, Harrison, Nelson and Zen).
Using this principle for car expenses means, when
estimating (I don't want to use the word "guessing"),
you should estimated a lower value.
For example, if you feel you're using the car 25% of the
time for business, if you can't prove this, you may want
to expense 20%.
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For more definitions ... |
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| Sandy's Recommendations |
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Unless you're producing monthly and / or quarterly
reports, it is not necessary to record these car
expenses until year-end.
However, if you need to produce reports for external
use, you should calculate car expenses monthly (or at
least quarterly).
I recommend you keep the details on a
spreadsheet.
Add each expense, ie. gas, let's say the total for the
year was $2,120 (including gst), take this and multiply
by the business percentage, ie. $2,120 x 32% =
$678.40 (don't forget if you have a GST account, to
record the GST separately).
Bookkeeping Entry:
As these are car expenses, I am assuming
the expenses were paid for on your personal bank
account, therefore:
debit: Auto expenses
debit: GST (if applicable)
credit: Owner's contribution / draw
Remember to keep the receipts as backup.
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| Next Issue - Keeping & Organizing paperwork |
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Learn:
Who's asking for what
How to organize papers to find them quickly
What to keep, what to toss
Do I have to keep everything and why
How long is it necessary to keep everything?
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