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June 2008

in this issue

Business Scenario
- Keeping & Organizing paperwork


Accounting Tip

Did You Know ?


Sandy's Recommendations

Next Issue - Buying versus leasing


about e-ccounting

e-ccounting is a monthly newsletter focusing on accounting tips and solutions. Our mission is to educate our clients, students and readers by offering these resources in response to your ongoing questions.

It is our objective to gather information and provide easy access for your current and future needs.
Back-issues are available on the accountrain website.

These tips are not complete answers to complex questions. We therefore recommend, when in doubt, contact the professionals or government agency.

about accountrain

accountrain simplifies the client / accountant relationship.

accountrain offers a unique combination of knowledge and people-skills to solve all your accounting needs.

accountrain specializes in the how's and why's of accounting.

Is accountrain the right accounting team for you? Find out more....

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Please forward this to anyone you feel may benefit from some free accounting tips. They'll be glad you did.

Sandy's Question Corner

Do you have an accounting question? Send it to us at accountrain@magma.ca


accountrain is now offering a series of three workshops. Take one, two or all three and save as you learn. The informative and interactive format guarantees a comfortable and fun learning environment. The topics:

1. Understanding How to Read Financial Statements

  • 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, and
  • Key accounts, definitions, ratios and samples to review.

2. Accounting 101 - for new and small business
  • Review of common questions, including GST, incorporating and many more
  • Choices for maintaining bookkeeping
  • Understanding government requirements
  • Shortcuts, tips and organizing all that paper!

3. Year-end Prep & New Year Planning
  • It's never too late to get organized
  • Understand what's different including: depreciation, accruals, deferred revenue and prepaids
  • How to choose accounting help
  • Preparing for an audit, and how about avoiding an audit!
  • Learn to streamline your bookkeeping methods to save time and money.

Fall dates have been scheduled. For more information or to register, email accountrain@magma.ca

  • Business Scenario
    - Keeping & Organizing Paperwork
  • I'm trying to keep my office organized, how long do I have to keep my tax returns and other business- related documents?

  • Answer
  • Tax returns and receipts, in case you are audited, must be kept for the current year and six past years.

    In other words, currently we would keep all our 2008 records, as well as from 2002 to 2007.

    Anything from 2001 and prior can be tossed!

    Pay stubs - once you receive and agree to your annual T4, there is no need to keep them any longer.

    If you are incurring home and car expenses, the same six years plus the current year rule applies.

    For personal items, ie appliances, etc, keep receipts until you either dispose of the item, or the warrantee runs out.

    For small items keep the receipt until it is no longer returnable.

  • Accounting Tip
  • There are several ways to organize your papers and getting help is OK, but keep in mind, it has to make sense to you.

    In the end you're the one who has to maintain your filing system and find your stuff.

  • Did You Know ?

  • As the papers accumulate you may run out of space!

    There are two services that can assist with this:

  • (1) Off-site storage facilities

  • It is recommended you identify the outside of the box and keep a logue of what is in each box.
    The facilities charge by the month for the amount of space used, and will charge an additional fee when you need a box to be retrieved.
    The turn around time for both pick-up and retrieval is usually within 24 hours.

  • (2) Shredding companies

  • There are different types of services. Some will pick up and shred, while others will let you shred and just pick up the waste.
    The first is more common, the business will allow you to drop off papers in a locked bin, and make regular, scheduled visits to retrieve the contents of the bin.

    For more Did You Knows?
  • Definition
  • In past issues, Principles were introduced (GAAP). There are additional rules in accounting known as assumptions. One of them is "Separate Entity Assumption".

    "Each enterprise is considered as an accounting unit separate and apart from other entities". In other words, many people own many different businesses. It is important to keep separate books for each one.
    (taken from the 3rd Canadian Edition of Intermediate Accounting by Welsch, Zlatkovich, Harrison, Nelson and Zen).

    How does this tie in to our topic on filing?
    It will make life a lot easier, if you also keep all the paperwork for each business separate as well.

    For more definitions ...
  • Sandy's Recommendations
  • Filing for bank statements: After the bank account has been reconciled for the month, keep the bank statement with the cancelled cheques.
    Separate all the back-up information as stated below:

    Accounts Payable
    Vendor Invoices: Keep a folder for each active vendor / supplier. For one-time suppliers, file in miscellaneous files. Don't put all the miscellaneous together. For example, you can have Misc A-G, H-N, M-S and T-Z.

    As well, keep Government files together, PST, GST, etc.

    It is also easy to keep separate files for staff, ie reimbursement of expenses, ie travel.

    Prior to paying the invoices, keep them in a file, perhaps in order of when they are due.

    Payments (cheques) Keep the cheque stubs together in numerical order, including cheques that have been voided.

    Accounts Receivable Sales Invoices: Keep in numerical order (in a folder or binder), keeping unpaid invoices on top of the folder. With the oustanding items left on top, it allows for a quick and regular review of what is outstanding.

    Deposits: After they payments are entered, attach the cheque stub to the back of the invoice, and file them in numerical (or alphabetical) order.

    Additional files
    Some files once set-up, may only need to be accessed on occassion. They include: insurance(s), rental lease and equipment leases and warrantees.

    You may want to keep payroll and personnel files locked or at least not in a location that is accessible to everyone.

  • Next Issue - Buying versus Leasing
  • Learn:

  • When is leasing a better way of expensing big ticket items (vehicles and equipment)
  • What are the initial costs of both
  • Are there pros and cons
  • Who is responsible for what, ie. repairs
  • How does it all end?
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