Hourly Based Fee
Only Advice
Call today to arrange a meeting.
1 (902) 393-1248
P.O. Box 1201     Charlottetown, PE     C1A 7M8
T: (902) 393-1248 (direct)     CorkumFinancial@pei.sympatico.ca     www.CorkumFinancial.ca

Business Management – Bookkeeping Issues

Bookkeeping is a critical matter for all businesses. Appropriate bookkeeping is required for adequate management and to meet legal responsibilities. I can help you with the design of a system and instruction. If you use an external bookkeeping service, you must still accept responsibility for its accuracy and completeness. We do not provide bookkeeping services, but can provide you with advice to set up a bookkeeping system and to ensure you receive good data from your bookkeeper. Consider the following bookkeeping issues:

  • Who should keep your books – owner, spouse, employee, independent party? Internal bookkeeping will provide you more information for managing your business.
  • How sophisticated must your books be – is a full computer system needed or a simple cashbook? Is bookkeeping/computer instruction needed?
  • Design your chart of accounts to provide meaningful information to you at year-end. Design easy to understand monthly reports with key data to measure your performance if you are not comfortable with full financial statements.
  • Use a separate bank account to segregate business from personal transactions. All expenses should be paid by cheque and evidenced by an invoice.
  • Proper filing systems should be established – audit trails are required.
  • Personally paid business expenses must be accounted for by submission of invoices containing proper descriptions, or expense reports with invoices attached.
  • Payments in cash should be avoided, but if essential, must be documented for tax reasons. Prepare your own voucher recording all details that would be on an invoice. A proper petty cash accounting system should be set up and balanced regularly.
  • Personal expenses should not be paid by the business, but if paid, they must be properly identified and charged to the person for reimbursement.
  • Track business use of personal vehicles with a mileage log and keep details of all related expenses, if applicable.
  • If you use a business vehicle for personal purposes, track the personal use with a mileage log.
  • If you may claim a home office, determine the appropriate proportion and track all household expenses, after reviewing these details with your accountant.
  • How should the owner be paid? The cost/benefit of various payments must be evaluated. These include wages, bonuses, dividends, fees, interest and repayment of shareholder loans.
  • Payroll calculations must be accurate and T4/T5/WCB and subcontractor filing requirements must be followed.
  • Ensure Provincial sales tax (including self-assessment for out-of-province purchases) and Goods and Services Tax are recorded properly to minimize your remittances while simultaneously complying with all legislation.
  • Ensure invoices and receipts for all disbursements are retained, including slips showing the GST paid and an adequate description of the purchase (especially when credit cards are used).
  • Ensure your system contains controls over cash and accounts receivable to ensure all sales are recorded, all collections are properly deposited and only authorized purchases are made.

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum