How To Ensure Rental Income Within Your Corporation is Active Business Income
How To Ensure Rental Income Within Your Corporation is Active Business Income May 5, 2023 Tax Question: How do you ensure your rental income within
Home » News » Canadian Tax FAQs » What are some Common and Costly Bookkeeping Mistakes?
Tax Question:
What are common and costly mistakes made in corporate bookkeeping during the year and how can these be avoided?
Facts:
There are many simple checks and cross-checks that can be done monthly to help find and correct common and costly bookkeeping mistakes.
Bank accounts, Accounts Receivable, Accounts Payable, and Sales Tax accounts are common areas of avoidable bookkeeping mistakes. Bank accounts are often reconciled using a reconciliation report within your bookkeeping software. This is a step where you check transactions. Sometimes, even though this report will tell you the bank account is reconciled, an error has occurred within the software set-up and the account is not actually reconciled to the account balance on your ledger. This can be avoided by additional steps such as cross-checking the numbers that the computer is relying upon. For example, checking that your closing bank statement balance per the reconciliation actually agrees to your bank statement for the month and that your closing bank account ledger balance per the reconciliation agrees to your ledger.
Accounts Receivable and Accounts Payable modules in accounting software sometimes will let you post a transaction to the controlling account without using the sub-ledger module. This creates errors in that your Accounts Receivable or Accounts Payable summary listing will no longer agree to the amount in your ledger account. This can be avoided by cross-checking monthly that your summary Accounts Payable and Accounts Receivable report balances agree to your ledger. If you do this monthly, errors should be easy to identify and correct.
Sales tax returns are often filed based on the sales tax reports within your bookkeeping software. However, sometimes transactions get posted through the general ledger to these sales tax accounts without being linked to the sales tax reports. Therefore, it is important to cross-check these sales tax reports each month to ensure they tie to the balances in the ledger. Then the appropriate adjustments can be made on the sales tax return for any discrepancies due to journal entries that were not caught by the monthly sales tax report.
If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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