Purchase the series, all three videos at 10% off the individual prices
Find out more at Bookkeeping for Inventory Parts (November 2012 IPBC webinar series)
Q: Are we going to be able to send questions after? It is going to take a bit of time for this to sink in.
A: Ask away.
Q: You are doing a great job. It is definitely not you, it's the topic:) I have found I have to record the change in inventory when I am posting entries to a T2125. I find that is how I can have the T2125 Income Statement match what is in QuickBooks.
A: My system of posting the Opening Balance and the Ending Balance and offsetting the difference to Purchases account works, as long as when you adjust Qty/Value of Items, you record the adjustment again on the Income Statement, before adjustment of COGS and after to arrive at COGS.
Q: Can you explain the posting of the ending balance to purchases in QuickBooks?
A: See above, and download the spreadsheet, it's in my >Links>Complimentary Links> Sample Data files along with the *QBB files to study
Q: Thank you, I think I finally got it!
A: I'm so glad, this isn't an easy concept, when the change in inventory isn't just one number on the Income Statement, part of it is buried in the increase in Inventory because purchases were added, but may or may not have all been sold, and inventory was adjusted for a variety of reasons we covered in the workshop today.
Q: Will this company file (including the transactions you input today) be available for download on your website?
A: Yes, again, go to >Links>Complimentary Products>Sample Data
Q: Are we able to get the PowerPoint? Is this webinar available in the member area?
A: No to both. The PowerPoint is just a few slides and those are my talking points/notes, not available for distribution. No, BUT, you can purchase the videos in my shopping cart under Master QuickBooks Software - See the Inventory Series, November 2012
Q: Great workshop series - thank you!
A: No thank you for being a great audience!
Q&A Today's Inventory Parts workshop - Nov 28 2012
Why Saturday's 3.5 hour workshop wasn't nearly long enough...
If you really intend to complete T2125's, I'd recommend first of all, that you've read the Income Tax Act. You can find a free copy on the Justice Minister's web site, www.justice.gc.ca or at www.canlii.org or you can buy a copy with annotations and indexes to help you find stuff from either Carswell Thompson or CCH. An annotated copy costs about $125 and they update them several times per year.
Then I'd recommend you read the CCH Preparing Your Income Tax Returns latest edition every year to get what you can't get from the law, which is an interpretation. That book costs about $100
Then, I'd recommend you read the CRA website from cover to cover - start with the Site Map. That's free but very frustrating as the topics are sort of dealt with like you are cross dressing, you'll find bits of information all over the place without the connectivity to really figure it out without years of pouring over the IT Bulletins, the IT News and IC's. plus the Income Tax Act, but I already said that above.
And then, after all that, here's a 30 hour course you might appreciate...that delves into the fine points of the form completion offered by someone who does a great job of delving into detail.
Evelyn Jacks course on Proprietorships
and oh yes, then you still have to figure out how to make the tax software work, and check your work to make sure you didn't create one too many T2125's and enter everything twice, or even three times or the vehicles on one schedule that links to one T2125, and the home office on another, and the assets on a third, and the operations on a fourth...
Just kidding you think? I had to fix someone's return for several years back because of exactly this prior preparer error.
If you aren't at this level, and just want to learn how to prepare a basic tax return, there's always my Student WorkBook with videos and case studies to get you started. It's under the My Projects tab on my website.
Start now! Please don't wait until next April though, because even that takes a few hours to work your way thru.
Why do record keeping the old fashioned way?
Can't you just add up the receipts, plunk the numbers on the form and call it good? Who needs to keep proper records? It doesn't really matter, and even though it is the law that you're supposed to keep records, not just keep receipts...
The topic, of accrual accounting for self-employed taxpayers surfaced over the weekend during my presentation on T2125 Self-employment for the Surrey Langley North Delta CGA Chapter. Someone said that if they had to do accrual accounting for their self-employed clients, they wouldn't be able to do as many returns as they do now and that client's wouldn't be willing to pay for the increased cost.
In the moment I let it go. I should have responded that they'd make more money with fewer clients. Let the clients who don't see your value go, and spend that time on the ones who do. So I thought I'd say it now and add some more thoughts that occured after the event.
Before tax season even hits, consider the following thoughts carefully and then increase your rates, announce your intention to provide first class service and watch what happens.
Here's the start of my great reasons to do accrual accounting list.
Accrual means recording sales on the date the sale is finalized, and recording the cash receipt, even if its on the same day, as a separate transaction, dated the date the funds are received, using Accounts Receivable to clear the transactions through a customer . The date they are deposited might again be a different date, that's why it's so handy to have an Undeposited Funds account automated in QuickBooks.
Accrual also means recording purchases on the date on the purchase document and recording the payment, even if it's on the same day, as a separate transaction, clearing the Accounts Payable using the Vendor name.
Now for the reasons why you'd want to do this for sales/payments received
- To ensure that the customer actually paid
- To ensure the payment was recorded against the right invoice
- To ensure that the sale was recorded on the right date for revenue recognition purposes
- To ensure the sale was recorded on the right date for GST/HST recognition purposes
- To ensure that all receipts have invoices - if all you have is a pile of invoices, and one goes missing, how will you know if you don't also record the deposits and cross -check that all invoices and all payments are recorded
- To provide a historical record of how long it took the customer to pay you, because maybe next time, you'll ask for a retainer up front if you know this customer is really slow at paying, or you'll turn them down if they never paid you at all.
- To ensure that you've recorded all the purchases, it's necessary to record the payments because that way, you can see if there's a purchase missing - it's called 'exception reporting' where you record all the payments that should have receipts, and then record the receipts, and if there's either a receipt with no payment, or a payment with no receipt, you've got an exception that needs investigating.
- To ensure that all payments were made because if you can't prove you paid something, you have to add it back in 2 years - S. 78 of the Income Tax Act - unpaid amounts
- To ensure you only pay something once, and not more than once (that's why all purchases should be recorded in AP and all payments should be recorded to clear AP, no matter how they are paid)
- To ensure you record all expenses, even if they are reimbursed, and that you invoice all reimbursements, adding appropriate GST/HST or PST now that it's coming back..
- To provide a historical record by vendor of what you purchased and when in a sub-ledger
- To provide proof of payment in order to claim an ITC on the purchase
The last reason is all encompassing - it's about success.
When your client's business grows because they have confidence, it very well could be that they can grow because their finances are under control, it's because you put the right controls in place from day one. Great habits, proven methods of control.
The best part, it will help your clients (and you) sleep at night, knowing the receivables are being collected, the payables aren't being paid twice, and the finances are under control.
So if you lack confidence, or you don't believe in yourself or in your clients, go ahead, add up receipts with a tape and tell yourself it's fine to not worry about your client's financial health and future well-being.
If you do believe your clients business's will grow and so will yours because their business
grows, start every client out on the right foot, by doing it properly from the beginning. Otherwise, when there's a question about the tax records, you'll have to do it over anyway because you'll never be able to figure it out from the tapes, which will have faded and may not even be legible any longer.
Doing it the old fashioned way, you'll have instant answers when your client calls to ask for a document, because you did it right the first time and filed it so it could be found, in alphabetical order. And if that doesn't make you look good, I don't know what will.
If you want to know more about how to keep really great records that will give you the confidence to succeed, check out my YouTube Channel for a 49 minute video.
http://www.youtube.com/TaxDetective/
The CRA Website
Not only should CRA group together topics of a similar vein so that various taxpayer groups can compare and contrast the rules as set out in my post the other day...
Here's some other thoughts as I get ready to meet CRA this morning.
Use the structure of the Income Tax Act as the basis for setting up the structure of the CRA website.
It wasn't until I sat down after failing the IT 2 course and Ed Kroft told me that to pass the course, I'd better read the Act... that I really got what it was all about. It was the Table of Contents at the beginning that nailed it. It was the Index at the end where all the concepts were linked to Sections that filled in the gaps. It was reading the actual words of the sections and getting that this piece of work was a giant algebraic formula in prose.
The secret is to go back to the structure of the Act and not to try to create your own structure. Then, it's necessary to reference the real thing as well. It's all well and good to have Interpretations by experts, but there is no substitute for reading the sections. Now that we have the Internet with 2 free sources of the ITA, www.justice.gc.ca and www.canlii.org who both keep it current, there's no excuse to not do so.
And, there's no reason on earth to require that every teacher in the country log into the education portion of the website with repeat use of their personal information in order to view the educational section. Whose dumb idea was that? And only having an out of date Ontario example? Come on.
We need current examples of all the forms, we need to see what a tax return should look like for an extended family, for a self-employed person, for someone with employment expenses, all those audit demand letters on employment expenses, rental expenses, self-employment that you're sending out, do you ever once consider that people have no clue how to complete the forms and that they are doing the best they can with a horrible amount of requirement for detail that they can't imagine will ever be looked at? They need examples to follow. Yes, its always possible that they might actually figure out that they haven't been claiming what they should have claimed, or will try to claim more, but maybe they'd actually get that their claims are ridiculous if they saw a sample.
And we need Box 85 on the T4 to be mandatory, it's no different than union dues.
Plus we need clarity about claiming medical expenses in so far as the wording of what qualified medical practitioners wording will be acceptable for most of the 150 medical expenses, and now for the Infirmity designation for the Family CareGiver Amount. How on earth are QPs supposed to know what to write that would be satisfactory? Are they supposed to be able to read the Income Tax Act in order to complete a letter that will satisfy CRA? That's just ridiculous and it needs to stop. Someone's cruel childhood game translated into adulthood needs to stop. I'm not going to tell you what to say, you have to guess is about how QPs are being treated. Then, when they don't say what's necessary they are subjected to multi-page requests for details instead of being asked if they could write what is required. I find the whole thing tiring just contemplating the millions or billions wasted on this process and all for what? A political game of tax credits.
T2125 workshop Nov 24 2012 followup
Yesterday, the Surrey Langley North Delta chapter of CGA hosted an event on T2125. The links for this presentation are passworded and the people who attended have the password. Thanks for the positive feedback on your forms!
I've added the YouTube link for the 49 minute video on my channel about internal controls on payables using QuickBooks software; and there's now link to download and SAVE AS the *QBB file and the Profile T1 2011 data file as shown in yesterday's workshop. I've also posted the Home Office page link.
If you're considering public practice, you must be registered as a CGA at some level of public practice (there are multiple levels). You definitely can't be a retired CGA if you plan to do anything more than data entry and checking the work. Why? Because as a retired CGA you don't need to keep current. It's that simple.
If you are self-employed or on contract, and prepare any tax returns or do any summarization or analysis leading to or completion of compliance work, even if you don't sign off on T1s, T2s, T3s, T3 Supp, T4s, T5s, T5018s, GST/HST, PST, WCB reporting, etc and charge for doing so, registration is required. You'd be much better off getting hired as an employee instead. If you volunteer, it's necessary to check in with CGA BC first as well. Contact the CGA BC office next week as that isn't my area of expertise.
What do I do? I am a social media maven it seems, much to my surprise, as I was just having fun exploring the medium when my friend Merge @mergespeaks shone a very bright light on what I was doing at a CGA conference on social media in Whistler several years ago now. I present workshops, live online, usually for IPBC, but also for private clients looking for online training. I do some live in person events, and consult and coach business owners, accountants and bookkeepers on mastering the use of software, specifically QuickBooks, Quicken, and Profile software. I love to research tax topics to write articles for publications and to share with fellow CGAs and other groups I participate in via LinkedIn and a CGA's Only tax study group. I have a short, exclusive tax client list, enough work to keep me and my clients happy. I love my life.
Mandatory e-Filing effective January 2013
Link to CRA FAQ on Mandatory e-Filing
If you are a tax preparer, it's necessary to update your status for next year,
and if you've never registered before, better start early as it's a process that takes time!
Click here if you've never registered to e-File
CGA BC Draws the line at data entry and checking the work
Anything more than data entry and checking that the numbers entered are correct and reconcile to the documentation or to third party information available is considered public practice and CGA's in BC must register and purchase insurance.
But can just the simple act of data entry be cause for concern? Do you have to care about what you enter? Or can you turn a blind eye? See the questions and answers below.
Q#1 If Mary Smith, CGA (a mythical character in earlier posts) calculates the GST/HST return, summarizes the payroll data entry to prepare the PD7A, or prepares a report to calculate the WCB premiums, will she be required to be registered in public practice and purchase insurance by the Code of Ethics for CGA BC?
Answer #1 YES, Mary will be required to register and obtain insurance. Services including summarizing, analysis, advice, counsel or interpretation are considered to be in the practice of public accounting by definition in the CGA BC Code, as is the preparation of tax returns or any other statutory filing. Payroll, GST/HST and WCB are all statutory filings.
Q: Could Mary get around this by just preparing reports and have the owner sign them?
Answer #2 NO, she can't say she didn't do the work because that would not be telling the truth.
Click here for a link to the CGA BC website for information about public practice registration requirements
Q: For just entering data can CRA invoke 'Civil Penalties'?
Answer #3 YES and this applies to bookkeepers and accountants, and to business owners too! If you haven't ever made time to read why and how this penalty applies, I recommend clicking on this link:
CRA: Third-Party Civil Penalties
See #32 and #33 Clerical or Secretarial Services - these do not include bookkeeping services, such as recording business accounts or transactions and can lead to penalties
See #57 Exemption for Employees - which doesn't include employees of the tax return preparer..
See #72 Disclaimers don't absolve the preparer
See #65/66 Withdrawal where false or suspicious statements
See #67 False statements in prior years must be rectified to extent false statement affects return of current year
See 18 examples of false statements, culpable conduct, tantamount to intentional conduct, indifference and wilful, reckless or wanton disregard of the law