Bookkeeper-ese at your fingertips!
Bookkeeping is like every industry - rife with jargon and acronyms that simplify our lives, but give clients headaches. We'll try here to explain the most common ones, in language that can easily be understood. Let's remove some mystery! We go deeper into some of these topics in our blog - go check it out!
A/P - ACCOUNTS PAYABLE
The money a business owes to other businesses, for services and goods purchased. This category includes the invoices received and the payments made.
A/R ACCOUNTS RECEIVABLE
The money owed to a business by clients and customers for services rendered and goods received. This category includes the invoices sent and payments received.
CRA BUSINESS NUMBER (RT/RC/RP)
A business usually has a 9-digit CRA business number (BN), and an account designation after that - a two-letter code with (usually) 0001. The GST/HST account will be RT ("T" for Tax); payroll will be RP ("P" for Payroll); and the corporate tax account will be RC ("C" for Corporate).
DR/CR - DEBITS & CREDITS
While this is THE basic double-entry accounting principle, it's probably the most difficult to wrap one's head around. Debits are on the left side of the account, credits on the right. If one side is credited, the other side must be debited, and visa versa. Outside of that, if your bookkeeper mentions credits and debits, just trust that things are (or need to be) in balance.
The CRA will issue a Notice of Assessment to every taxpayer after the tax return has been processed. A great deal of information is included in this document, which is why we ask for last year's NOA before we start your T1.
T1 | T2
In Canada, a T1 is the personal tax return, and a T2 is the corporate tax return.
T4 | T4A
Individuals in Canada are issued either a T4 or a T4A for any taxable income they receive. A T4 is issued by one's employer for payroll income. A T4A is issued by companies and various institutions (including the government) for non-payroll income - such as payments received as a contractor or pension payments.
A shareholder in a corporation, when they are paid any money from the corporation, is not getting a paycheque, they are receiving dividends. Anyone who receives dividends needs to be issued a T5.
Construction companies in Canada need to report amounts paid to subcontractors through T5018 forms, instead of T4A forms.
We will add to this space as needed, so watch for updates. Check our our blog if you want to know more about bookkeeping and small business topics. Or drop us a line if you need bookkeeping or tax preparation assistance.