e-ccounting is a monthly
newsletter focusing on accounting tips and solutions.
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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.
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More information on
last month's topic - GST
In last month's issue, I stated "Once you've received
your number, it is permanent. In other words, if the
sales are less than $30,000 in the following year, it
doesn't matter, you are still responsible to charge and
submit the GST on your sales."
However, the ruling is, if your sales decrease below
$30,000 for over a year, and you expect this to
continue, you can de-register. This means, you will no
longer submit a GST claim or charge your clients GST,
or are eligible to claim GST on your expenses. For
more information on re-registering your GST, contact
the CRA at 1-800-959-5525.
The Federal government has proposed another
decrease to the Federal Goods and Service Tax
(GST). IF this proposal takes place, it should
commence on January 1, 2008. The rate will
decrease another 1% and therefore be 5%. (The rate
had decreased from 7% to 6% on July 1, 2006.)
Again, please note, this proposal has NOT yet been
approved. For more information, contact the CRA at 1-
- Debits & Credits
When I was teaching full-time, one of my students
seemed to know what she was doing, yet when she
handed in her first assignment every answer was
That didn't make sense, so when I reviewed it again, I
realized actually everything was perfect, just all
I knew right away she must have worked at a bank.
When I asked her, I was right. What does that have to
do with anything?
When we own a business and are recording a deposit
(or increase) to our bank account, it is considered a
debit. While if you look at your bank statement, your
deposits will show as credits.
We must remember the banks' books are based on
the fact that they have YOUR money on loan (if you
will), and it is due back to you anytime, a liability to
them, so they record a deposit opposite to how we
Debits and Credits are confusing terms. When I'm
teaching the basics I explain to my students / clients
not to get too hung up on these words and instead
think of them as increases and decreases.
The increases and decreases will vary so you should
use a debit / credit chart until it becomes second
nature (believe me, eventually it will).
There are five types of accounts
Assets and Expenses are debit accounts, while
Liabilities, Equity and Revenue are credit accounts.
What does that mean? In a "normal" course of
business, these are the normal balances for each
Again, I can't stress enough, how you should NOT get
too hung up on the terminology. Once you know what
type of account, then when it increases or decreases
you can determine whether it is a debit or credit.
Still confused? You just need to practice! To do so,
download the debit / credit chart before reading the
||For a free chart
|Did You Know ?
Each transaction must have at least one debit and one
credit, and the debits and credits must equal in
This is how double-entry bookkeeping works.
The History of Bookkeeping -
"Scholars have found records of debits and credits
ABCs of bookkeeping) dating back to Italy in the
1300's. Following the dark ages, business in Europe
boomed and it is believed that merchants began
using the double-entry bookkeeping system--or
something very close to it--to handle the volume and
complexity of transactions.
Several systems were developed by mathematicians
and businessmen to summarize and communicate
business transactions, yet only one survived to
become the standard system we use today."
||For more Did You Knows?
Debits and credits are the bookkeeping terms used to
express how an account is affected by a transaction.
Based on the type of account affected, ie Asset,
Liability, etc., and whether the account is increasing or
decreasing, will determine if it is a debit or a
When you increase an asset (ie bank
inventory, Accounts Receivable) it is a debit, but when
you increase a liability account (ie. Accounts Payable,
Bank Loan) it is a credit.
Examples (to simplify, examples are without the GST)
Purchase for cash
- debit - Expense
- credit - Cash
Sale on account
- debit - Accounts Receivable
- credit - Revenue
Receipt of above
- debit - Bank
- credit - Accounts Receivable
review the debit / credit chart and follow these and
other examples ...
For more definitions ...
If you're doing your own books, after a typical week or
month's worth of transactions, have a professional
review your entries to ensure they are correct.
If so, then you are well on your way. If not, the
corrections can be made and you can re-learn things
properly before you get too far into it.
|Next Issue - Year-end
Are you ready?
What's all the fuss about, and why does year-end take
so long to prepare for?
In the next issue we will:
- Offer tips to keep you on track throughout the
- Discuss accounts to pay particular attention to.
- Offer reasonable deadline dates.