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Background

In Manitoba, if you are a licensed establishment and can sell Beer, Liquor and Wine .. you need to account for the purchases in the accounting records. It can be difficult, because most of the time (I believe), the Manitoba Liquor Control Commission (MLCC) holds on to preauthorized blank cheques .. the hotel or establishment just places an order, and a cheque is issued, or automatically debited out of the company’s bank account. There are usually invoices emailed to the business and just packing slips included with the shipments.

In Manitoba, Vendors selling Beer have a special price. The price is preset, plus GST and plus GST .. and then a refundable bottle deposit price is added. Individuals can return the empty beer bottles and receive that bottle deposit back. Beer drinkers do not just have to bring back the bottles purchased at one particular establishment, they can return it to any vendor that will accept returns. Usually, the MLCC (I believe) pays these vendors an extra 2 cents per bottle as a handling fee. Believe me .. it can start to get quite complicated - especially if you are “in tune” with what is really happening and monitoring your gross profit percentages.

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Depreciation

We depreciate the value of Fixed Assets over the life of the asset in the financial statements, and generally the method of calculating this amount is specifically stated in the Notes to the Financial Statements as a company policy. It really doesn’t matter what method a company uses to record and calculate depreciation, but the company should continue to use that same method year after year. Generally, there are four different ways to calculate depreciation:

1) Straight Line Method

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When You Are NOT on the T.I.P.P.

Just like I wrote in my previous post, Prepaid Property Taxes: T.I.P.P. and Journal Entries .. the reason one might adjustment the business and property tax accounts on a monthly basis, or at the year-end .. is to make sure that the expense is correct for the fiscal period. I provided an example what to do when you are on a T.I.P. Plan that might be over 10 months .. But, what if you aren’t on the tax instalment payment plan? Should you be adjusting your expense accounts anyway? Or Leave it alone as an expense when paid?

I would adjust the expense

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T.I.P.P. = Tax Instalment Payment Plan

Generally here in our province, your property taxes are probably either due June 30th or October 31st .. depending if you live in the city or in the rural country. The city or municipality often offers you the option to pay your property taxes on a monthly basis, usually by automatic withdrawal from your bank account on the first of each month. The property taxes (and business taxes) run for the calendar year .. and generally are precalculated as a fixed amount until the new taxes for the current year become in effect. Then, the payment would be altered slightly and be adjusted if necessary.

For accounting purposes, generally speaking, if your fiscal year end is December 31st .. then at the year end date there should be no prepaid business or property taxes on your balance sheet.

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When I am preparing monthly financial statements, I often ask myself and my client the following question ..

How Accurate Do You Really Need Your Monthly Financial Statements To Be?

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Suppose you have an accounting blog .. like .. HART (1-800-HART) … and you want to show off your accounting knowledge ….

READER: Dear HART … I just purchased a new car that was financed over 3 years, for $25,000.00 .. I put down $3,000.00 which included the first month’s loan payment of $500.00. What’s my journal entry?

HART (1-800-HART): Congratulations on your new purchase .. I hope you have many years enjoyment with your new car. Here’s how to “book” the journal entry into your accounting records.

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This is Part (II) of two parts, because the original post seemed to be getting long. In Part (I), I had tried to identify some of the common difficulties that can arise and problems that can stir up during the bank reconciliation process. In this part, I will discuss ways in which I overcome each of those situations and provide you with some tips to help make reconciling your banks and cash accounts easier.

Reconciling - Computer Cheques

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Businesses with sales over $30,000 CDN must register for a business number and charge 7% GST on their services or products, (6% beginning July 1, 2006). Just like the provincial retail sales tax (PST), to be compliant with the government, you must report and remit these collections over to the goverment. About this extra 7% money - it is “trust funds” - this money is not your extra profit. It’s money you collected as an agent or on behalf of the government and believe me .. they want it.

The good news, is that everybody else is also charging you GST, and you are allowed to deduct these GST payouts, or “Input Tax Credits” (GST ITC’s), to offset the amout that you have to remit. It is for this basic reason that bookkeepers (and business owners) and ME … are quite conscious to be sure to correctly separate the GST ITC from the expense amount, in order to maximize the refund or minimize how much Net GST the client has to pay.

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Everything should be back to semi-normal blogging schedules for me, by Friday June 2, 2006 ..

Food for thought

Are you leasing any computers? Vehicles? Other Equipment?

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I try not to recommend accounting software to clients, as most of my clients either have their own software already purchased (or obtained) .. or I will be entering the raw data myself. The reasons are:

* If they have the software, there’s no real reason to spend more money on new software - especially if the bookkeeper is familiar with the software - generally, they all do the same thing
* If I will be entering the raw data myself .. what difference is it to my clients what I use? Right .. there is no difference

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