Frequently Asked Questions

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What are payroll deductions and when are they due?

Payroll deductions include Canada Pension Plan (CPP), Employment Insurance (EI), and income taxes that are withheld from your employees’ pay cheques, plus the employer’s CPP and EI contributions.

How often your payroll deductions are due depends on your average monthly withholding amount (AMWA) from two years ago. For example, if two years ago you withheld $3,000 worth of payroll deductions or less per month, you have the option to remit quarterly.

Payroll Deduction Due Date Calculator
AMWA Remittance Frequency
$3,000 or less Quarterly
$3,000 to $14,999.99 Monthly
$15,000 to $49,999.99 Twice per month
Over $50,000 Four times per month
What is a balance sheet?

A balance sheet reports the company’s assets (things the company owns), its liabilities (bills and debt), and its equity (the difference between the assets and liabilities).

What are prepaid expenses?

Prepaid expenses are future expenses that are paid in advance. Let’s say that you pay an annual amount for 12 months’ worth of insurance and your policy period is from November 1st to October 31st the following year. The insurance that you paid for the months of January to October will be posted in your prepaid expense account at year-end because those expenses actually belong with the following year.

Where does the purchase of equipment show up on the profit and loss statement?

Your equipment purchase does not show up on your profit and loss statement. Equipment is an asset and is located on the balance sheet. However, the depreciation of the equipment will be reported as a depreciation expense on the profit and loss during the years that the equipment is used.

Should I buy new equipment?

Good question! There are different ways to make this decision. One technique is to consider the future cash flow if you buy new equipment as compared to the future cash flow if you use the old machine. Both cash flows need to include the income and expense for each option. The calculation with the highest positive net profit is the best alternative.

Of course it is difficult to predict the future. There are other calculations and strategies that can be used to make this decision. We would be happy to help you determine the best course of action.

Is a loan payment an expense?

Often a loan payment consists of both interest and principal. The interest portion is an expense but the principal portion is a reduction to the liability account on the balance sheet.

What is GST/HST and when do I need to apply for a GST/HST number for my business?

GST or Goods and Services Tax is a federal tax that almost everybody has to pay to the government on most purchases. Ontario harmonized its Provincial Retail Sales Tax with GST to create a Harmonized Sales Tax ( HST) at the rate of 13%. Although the consumer pays the tax, businesses are generally responsible for collecting and remitting it to the government. Canada Revenue Agency (CRA) requires you to register for a GST/HST account when your sales exceed $30,000.00 in 12 consecutive months. We can register your business for you.

When does HST get calculated on transactions?

In accrual accounting, HST gets calculated at the point of transactions. If you have uncollected receivables you will have paid HST that was calculated on your sales to CRA before you have collected the payment for the sale. Sometimes this causes a shortage of cash.

In cash accounting, HST is calculated when the invoice or bill is paid.

How do I keep track of my business mileage on a personal vehicle?

The best way is to keep a log. Take an odometer reading at the beginning of the year, log all kilometers whether personal or business, and note what the business trips were for. Then take an odometer reading at the end of the year and calculate the percentage that was business use. This is the percentage that is used to claim fuel, repairs, maintenance, insurance, and lease expenses. Remember to keep all related receipts.

When are small business or self-employed tax returns due?

Any income tax owing is due on April 30th to avoid interest. People who are self-employed do not need to file their tax returns with CRA until June 15th.

For tax deductions for medical expenses, how much can I claim?

In order to claim your medical expenses the amount must exceed 3% of your net income.

You can benefit from tax breaks if you claim all medical expenses for you, your spouse or common-law partner and your dependents who are under 18 years of age on the same tax return.

It’s usually better to claim medical expenses on the income tax return of the partner with the lower income.

You can also claim travel costs, meals and vehicle operating expenses, but only if you have travelled more than 40 km to get to the medical facility for treatment. If you travelled more than 80 km to get to the treatment you can file additional expenses for accommodations (hotel, etc). See the CRA’s Travel Expenses page.

Which receipts should I save for tax deductions?

The most common receipts that you should keep are: donations, medical, childcare, unreimbursed work-related expenses, child fitness/art receipts, union or professional dues and rent receipts.

What is the difference between a bookkeeper and an accountant?

Bookkeepers enter the day-to-day business transactions into the company’s general ledger. They gather all necessary financial information and then input the data into the accounting software. Bookkeeping also includes accounts receivable, accounts payable, and reporting.

Accountants review the information that the bookkeeper has entered into the general ledger, make adjusting entries, and then prepare financial statements.