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Understanding How to Read Financial
An interactive workshop reinforced with examples.
Quoted testimonials from the Nov 2007 session "fun
& informative" and "You made it easy with your
simplicity of explanation".
Tuesday, May 13th - Ottawa
- The five key sections of the Financials
- 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
8:30am - noon
Regular price $199 (if you mention e-
Location details will be provided upon
Limited seating, for more information or to register:
- Business use of Home Expenses
I have a home-based business, what can I write-off?
Before we begin, let's just 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
The first step is deciding the
percentage of home
costs that the business will
There are two methods:
room count or (2)
an actual count of square
In either case it's based on the
for the business versus the space of
the entire house.
You are using a bedroom as an
office. (the house
has 3 bedrooms, 2 bathrooms, a
room and kitchen). Therefore you
are using 1 of 8
rooms or 12.5%.
Or you are using a 150 square foot
room out of a
1,500 square foot apartment or
There is no right amount, as long as
you feel you can
justify the percentage. Note: for
a small business
(operating from home) the average is
between 10% to
Once the percentage has been
established, these are
the items you can expense:Rent or Mortgage
Utilities (heat, hydro, water
and sewer). Usually
not cable, unless it pertains to
generating income for
Repairs & maintenance
How does one record Home Expenses on
The business portion of home
expenses is recorded
on your General Tax Return, in a
specific section of the
T2124 (Statement of Business
Although we tend to think of internet and phone as
utilities, DO NOT include these expenses with the
ones noted above.
Instead, tally up the totals of these two expenses and
apportion them at a higher percentage.
For example: If you are using your home phone for
business, then calculate the business portion up to
50% (not including long distance calls). For long
distance charges, highlight the items specific to the
business and expense that total.
For internet, it may be the opposite. Chances are
you're using your home internet account for your
business. If this is the case, then choose
an amount that makes sense.
Just remember, these expenses are extremely
individual, so do what makes sense for your family
and / or home.
|Did You Know ?
Once you determine the percentage it should be the
same every year, unless there is a change in how
much space is being used or you move and the room
If you move part way through the year, do each
address separately for the appropriate months.
||For more Did You Knows?
Generally Accepted Accounting Principles
There are seven principles (or rules). The reason I
am introducing this term with this topic is as
mentioned above, once the percentage has been
decided, there is no reason it should change from
year to year.
This follows the Consistency Principle
Text Book Definition: "This principle states that in
recording events, there must be consistent
applications of standards and procedures from one
accounting period to the next. This is essential so that
the financial statements for successive periods are
reasonably comparable." (taken from the 3rd
Canadian Edition of Intermediate Accounting by
Welsch, Zlatkovich, Harrison, Nelson, and Zen).
For more definitions ...
Unless you're producing monthly and / or quarterly
reports, it is not necessary to record these home
expenses until year-end.
I recommend you keep the details on a
Add each expense, ie. hydro, let's say the total for the
year was $1,060 (including gst), take this and multiply
by the business percentage, ie. $1,060 x 12 1/2% =
$132.50 (don't forget if you have a GST account, to
record the GST separately).
As these are household expenses, I am assuming
the expenses were paid for on your personal bank
debit: Rent Factor *
debit: GST (if applicable)
credit: Owner's contribution / draw
*Rent factor is an account all the home
expenses can be coded to. However, coding each
separately is also done, including Rent, Insurance,
Remember to keep the receipts as backup.
|Next Issue - Business Use of Car Expenses
The questions for expensing your car are the same as
for you home.How to calculate the portion that is applicable
What expenses are included
Why some expenses should be calculated
When and how to handle the bookkeeping
How to apply this information to your Income Tax