Bookkeeping and accounting
Bookkeeping and accounting are part of running any business. Whether you hire an accountant or are comfortable doing it yourself, keeping your books in order will help keep track of required records.
Hiring an accountant during your business start-up phase may be advantageous as he or she can help answer your questions about bookkeeping.
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Benefits to keeping organized records
Good records can help you plan for decisions that will affect the future of your business. The more organized your records are, the more you can get from them.
Organized records can help:
- Track and compare past and present financial positions
- Plan and forecast future financial positions
- Provide information to make good business decisions
- Satisfy reporting obligations, notably to the Canada Revenue Agency
- Save time and energy if your business gets audited
- Income records
See what you should track in your income records and access a sample spreadsheet.
- Expense records
See what you should track in your expense journal and access a sample spreadsheet.
- Free to low-cost applications
Discover how using low-cost information and communications technology products can increase sales and productivity for your business.
Types of records to keep
When you run a business or engage in any commercial activity, you need to keep records of various business transactions. These records include:
- Paper or electronic receipts
- Details of expenses and sales
- Payroll details
- Taxes collected and paid
Keep for how long? As a general rule, you need to keep all records and supporting documents used to determine your tax obligations and entitlements for a period of six years from the end of the last tax year to which they relate. At a minimum, the financial records should be permanent, accurate and a complete record of your daily income and expenses.
- Keeping records
Find out who has to keep track of records, which records to keep and other related information.
- Books and records guidance
Get guidance on books and record keeping in line with the new International Financial Reporting Standards.
Styles of bookkeeping
A useful record keeping system is one that is simple to use, easy to understand, reliable, accurate, consistent, and can provide you with information on a timely basis.
Examples of styles and systems of bookkeeping:
Single Entry Bookkeeping: This means every dollar transaction is recorded only once, either as income or expense, an asset or a liability. All entries are recorded on a one page synoptic journal, also called a revenue and expense journal.
Double Entry Bookkeeping: Each transaction is recorded twice, one account is credited with the given dollar amount and a second account is debited by an equal dollar amount.
One-Write Systems: These copyrighted systems are set up using carbon-backed cheques. As you write the information on a cheque, it also transfers the data to a record system.
Computerized Systems: These programs offer the speed and versatility and usually have the ability to produce daily updated financial statements. Many of these systems are scalable, so you can add on as your business expands.
You can learn more about bookkeeping with the help of online tools, books, business services and software. Introductory training in accounting can also be helpful if you are unfamiliar with accounting processes; many local business service centres offer such basic training, as do colleges.
- Accounting software
Determine if your business would benefit from accounting software and, if it would, learn about the different options that are available.
Changes to accounting principles
New accounting standards came into effect on January 1, 2011, replacing the Canadian Generally Accepted Accounting Principles that were used for both public and private companies. Now Canadian entrepreneurs must determine which set of rules is best for them.
Public companies must adopt the International Financial Reporting Standards, but private companies have the additional option of using the simplified Generally Accepted Accounting Principles for Private Enterprises. Both sets of standards replace the previous Canadian Generally Accepted Accounting Principles, but the latter has been developed by the Chartered Accountants of Canada's Accounting Standards Board in order to simplify reporting requirements.
It is up to individual private companies to decide how the differences between the two accounting standards will affect their financial reporting. You or your accountant should study the options carefully before making a decision. In choosing the simpler Generally Accepted Accounting Principles for Private Enterprises, you will be faced with fewer disclosure requirements to stakeholders, a factor that could play a part in your decision. Ask yourself how much information is required and by whom. The move to these accounting standards for private companies involves less change than adhering to the International Financial Reporting Standards.
You may want to adopt the international standards right away if you plan to go public in the future or if you need to be consistent with a parent or related company that has adopted the international standards. These standards will allow you to compare your company with public companies in your sector for benchmarking purposes.
There is nothing to prevent you from making the conversion from the Generally Accepted Accounting Principles for Private Enterprises to the International Financial Reporting Standards at a later date if necessary, but be aware that a future change will involve further investment.
- International Financial Reporting Standards
Learn about the new financial statement standards for public enterprises, which replace the Canadian generally accepted accounting principles.
- Accounting Standards for Private Enterprises
Find resources to help you understand and apply Canadian accounting standards.
- FAQ about Generally Accepted Accounting Principles for private enterprises
Find out about the simplified generally accepted accounting principles for private enterprises.
Finding an accountant
Your industry association should be able to refer you to local accounting professionals that are familiar with your line of business. There are also many online directories that can help you find an accountant that can meet your needs.
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