Corporate tax information

Do you own a small business and have considered doing your own bookkeeping? Bookkeeping is an important step of the tax process, as it organizes all the transactions for the year so the taxes can be filed. It also can be used to generate financial reports such as the balance sheet or income statement, which can give a business owner perspective on how their business is doing. For those who are not accountants or bookkeepers, this task can be daunting. Here are some tips to make your business bookkeeping easy and accurate:

  1. Bookkeep off bank statements
    1. It is much easier, more efficient, and accurate to utilize the business bank account or credit card to bookkeep
    2. This way you can use the business bank statements to provide you with all the transactions in order, bank balances etc.
    3. If you use an accounting software like QuickBooks, you can link the bank accounts to the software so they will automatically download the transactions to your QuickBooks
    4. If you bookkeep by hand using excel, your bank may have the option to download your bank activity in .csv format. This way you get all the transactions in excel and do not have to type them in manually
    5. You can reconcile your bookkeeping to the bank balance to make sure there are not any errors
    6. It is important to keep copies of receipts/invoices for 6 years in case of an audit, however to try to use receipts to bookkeep can be time consuming especially if its all from the business bank accounts versus pulling all the transactions from the bank accounts
    7. There are many transactions that could be automatically withdrawn/deposited into the bank account that do not often provide receipts (ie: pre-authorized debit transactions, bank fees, wire fees etc.), therefore it is better to use the bank statements to bookkeep from
    8. If you have used a personal card for business transactions, keep track/include those transactions only (not the rest of the personal transactions). These transactions are technically paid by shareholder loan (as you are the shareholder using your personal funds to pay for business transactions) and you can adjust them as such
  2. Utilize the best bookkeeping software for your business
    1. There is a variety of bookkeeping software out there, but not all of them may be the most convenient for your business
    2. Utilizing a software like QuickBooks is beneficial if you want bookkeeping and reports more often than at year-end, to be able to view/review all transactions, to invoice from and automatically track accounts receivable, to conduct payroll etc.
    3. However, software also has a cost associated, can be more complex to learn and use
    4. We would recommend using an online software instead of a desktop software, as it is easier for the accountants, bookkeepers, and business owners to access
    5. Utilizing Excel would be beneficial if you do not require bookkeeping or reports more often than year-end, have minimal transactions or would require minimal costs for bookkeeping
    6. We would recommend utilizing a template for Excel that sets up your bookkeeping
    7. For some businesses, utilizing a software is more of a headache than its worth, so evaluate your needs before deciding on how to conduct the bookkeeping
  3. Know your limitations
    1. The more important part of bookkeeping is making sure you are following the rules CRA has outlined regarding what can be included for tax purposes and to what extent
    2. In an audit situation, CRA may request to see the transactions categorized to certain accounts and/or receipts so it is important all transactions included are in line with CRA standards
    3. If you are not sure about how to categorize a transaction, make sure to keep track of them and check with your accountant at year-end
    4. For expenses such as home office, vehicle etc. that are typically paid personally and require adjustments, make sure you know the rules and keep track as specified by CRA. Click the links to see our blog posts “Home Office – Is This an Eligible Deduction for You?” and “What is an Eligible Deduction for Your Vehicle Expenses?” for more information
    5. It is important to note that CRA has different guidelines for different business types (ie: Sole proprietorship, corporations, partnerships) so it is important to know for your exact business what is reasonable to deduct

At Jibe Accounting we offer bookkeeping services and tax filing services, so if you are new to bookkeeping or would prefer a CPA firm to do your bookkeeping – give us a call!