Efficient Ways To Perform Bookkeeping
Bookkeeping plays a significant role in running a business. It consists of recording different types of transactions such as sales, revenue, expenses, purchases and many more. Expenses are an important part of a business due to which they need to be recorded accurately and error-free. Recording all these important things can be overwhelming and time-consuming if you decide to do this yourself instead of hiring a professional accountant. To make this aggravating process a little easier, we have made this article, which consists of several ways to help you perform bookkeeping efficiently.
Set-Up
a Filing System
A system should be
established for bookkeeping. This should help you keep track of all the receipts,
transactions, expenses, and revenues. The system should then be updated
consistently so that the books are up to date and you don’t lack behind. This can be accomplished manually or by using
accounting software such as QuickBooks.
Separation
of Business and Private Finances: –
Business
expenses should be kept separate from personal expenses. This provides a more
accurate record of transactions made for business. This plays an important role
in taxes. There are many ways to achieve this, such as getting a business
credit card and keeping receipts sorted.
Avoid
cash: –
We
suggest using credit cards over cash. It is often hard to keep track of cash
transactions. When a credit card is used, all the transactions can be easily
retrieved from the credit-card statements. This will save much time during
bookkeeping since all the transactions are in one place.
Store
Receipts
Receipts
are necessary as they validate transactions on a company’s books. These can
serve as proof in the future for audits and tax purposes. Storing all the
receipts can also make the bookkeeping process easier as you can compare the
records with the receipts if an error arises.
Accuracy
The bookkeeping
process should be done precisely to avoid negative consequences in the future.
Accuracy can be achieved by carefully recording all the transactions and
reviewing them, so they are error-free.
Read moreTax Consequences of Loans
Many of us lend money to our friends and family if they are in need. We often don’t consider the tax consequences associated with it if the loan is not repaid. The information below briefly consists of several ways to approach this situation if you are a money lender or provided a loan to a corporate/small business.
Capital Loss Election
Suppose
you are within the money-lending business and are treating the loan to
your friends/family professionally. In that case, you have rights as a creditor
to receive a loan repayment is taken into
account a capital property. If a loan becomes uncollectible, you can consider it to
dispose of for nil proceeds hence triggering a financial
loss on your taxes. You can then
use that loss to offset any capital gains you earned either within the same taxation year or in any future year.
To preserve your ability to claim a capital loss on a loan to your family/friends, the loan must be interest bearing. The rate of interest is often nominal, and report the interest earned on your tax return.
Loan to a Corporation
If you lent money to a family/friend’s company, which is a Canadian-controlled private corporation also known as a small business corporation (where 90% or more of its assets are measured by fair market price are used principally in a lively business carried on primarily in Canada), and the loan wasn’t repaid, the financial loss would be considered a business investment loss. In this case, half of the loss could be deducted against the debtor’s income from any source, including capital gains.
The rules here require that either the debtor is a small business corporation at the time election is formed in respect of the loan receivable or at any time within the 12 months before the disposition. Therefore, you should consider the debtor’s corporation’s status to correctly claim the losses on your tax return.
Summary
The above information
consists of different ways through which you can recover from the loss. But
most of us are not money lenders or did not pay attention to the status of the debtor’s
company. This is why it is essential to consult a professional tax accountant
and lawyer while lending money to avoid negative consequences. We can provide
you with in-depth consultation and solutions that can prevent problems that
might arise in the future and save you on taxes.
Read more