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e-ccounting
December 2007

in this issue

Business Scenario
- Year-end

Answer

Accounting Tip

Did You Know ?

Definition

Sandy's Recommendations

Next Issue - Choosing accounting help


 

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.

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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.

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Sandy's Question Corner

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

Important GST Notice - Effective Jan 1, 2008

As proposed, the GST has decreased to 5%. What does this mean to you? As of Jan 1, 2008 any vendors / suppliers that you are dealing with should only charge 5% for products and / or services dated as of Jan 1st. Anything before will remain at 6%.

For your invoicing purposes, the same thing applies. Any product and / or service you provide after Jan 1, 2008 should be charged at 5% GST, anything before will remain at the old rate of 6%.
For additional information, clients contact accountrain. For others, contact the CRA at
1-800-959-5525.


  • Business Scenario
    - Year-end
  • Many people procrastinate when accounting is involved. This is for many reasons. It's always easier to do the stuff you are most comfortable with and leave the stuff you have difficulty with, or just don't like doing.
    Imagine my surprise when someone told me they'd rather go to the dentist than to their accountant, ouch!

    Accounting is an easy task to set aside, but before you know it another year has gone by and once again you're scrambling to gather all the required accounting information to finalize your year-end.

    Believe it or not, like a doctor or dentist, some companies don't even have an accountant until they really need it, and in the accounting world, that is at year-end!

  • Answer
  • Don't wait until year-end to (a) hire an accountant or (b) get to your accounting tasks.
    Make accounting a task that needs to be done on a regular basis, like marketing, admin and servicing customers.

    If you build accounting into your weekly and monthly routines, you will not be scrambling at year-end.

    A few hints for keeping on top of your Accounts Payables and Accounts Receivables:

    • Enter vendor invoices regularly and code consistently.
    • Decide how often to issue cheques and try and stick to this schedule (excluding emergencies).
    • Deposit money coming in at least weekly.
    • Apply those payments to your outstanding AR list so it's always up to date.
    • Keep on top of the filing.

  • Accounting Tip
  • We are often asked, what is the "normal" turn around for a month-end and year-end?

    A typical month-end can be finalized 2-3 weeks after the month is over. Originally this was to ensure the bank statement(s) were in and the banks were reconciled.
    Now that bank information is available online, you should still allow enough time for all vendor invoices to arrive and for your sales figures to also be complete.

    A typical year-end would start with the final month being closed and add on an additional month or two and sometimes even longer (depending on the size of the company) to provide enough time to finalize all figures, reconcile all accounts and for preparing an information package for the tax preparer. (more about this in the January issue).
    Your tax preparer can help you determine what would make sense for your needs.

  • Did You Know ?
  • The year-end for sole proprietor and partnership companies is automatically December 31st, to coincide with personal income tax.

    The year-end for corporations is often the anniversary date of the first year.
    BUT, did you know, you can change your corporations' year-end?

    Many corporations tend to choose a year-end that is industry specific or choose a year-end to fall in a less busy time.
    Get a Chartered accountant to make the request, via letter / form, to the government. A reasonable request is rarely denied.

    For more Did You Knows?
  • Definition
  • Fiscal year vs calendar year.

    We all know what a calendar year is: January to December.

    A fiscal year is the twelve month period covering the business year.
    As mentioned above, for sole- proprietors and partnerships, the fiscal year end matches the calendar year.
    However, the year end for a corporation reflects on it's anniversary date. A popular year-end in Ottawa, being a government town, and to coincide with the government year-end, is March 31st.

    There is no right, wrong, good or bad year-end. It should make sense to your business. As mentioned, since year-end prep takes additional time many companies choose a quieter time for their year-end.


    For more definitions ...
  • Sandy's Recommendations
  • Plan Ahead !

    Reconciling the bank accounts on a monthly basis is an absolute must. If you don't have resources for this, hire an accounting consultant to help with this as well as any other accounting-related tasks your staff may not be completing due to time restraints or not knowing how.

    Another hint is to have a professional perform a review on a quarterly basis. This will prevent mistakes carrying over month after month. In the end, this will save both time and money.
    Is your staff taking the time to review accounts on a regular basis? Ask them!
    Accounts that should be reviewed regularly are:

    • Bank Account(s)
    • Prepaid Expenses
    • Accounts Receivable
    • Accrued Liabilities
    • Deferred Revenue
    • Accounts Payable

    Other accounts needing attention:

    • Investments
    • Inventory
    • Capital (Fixed) Assets
    • Other Payables

  • Next Issue - Choosing accounting help
  • CA, CGA, CMA, bookkeepers - what's the difference, and who should be doing what?
    In the next issue we will:

    • Define the different accounting designations.
    • Discuss the roles each should play.
    • Offer suggestions on dividing accounting tasks, both in-house and what can be out-sourced.

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