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
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.
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 in 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.
Introductory training in accounting can be helpful if you are unfamiliar with accounting processes; many local business service centres offer such basic training, as do colleges.
As of January 2011, public companies must adopt the International Financial Reporting Standards. Private companies have been given the option of using the simplified Generally Accepted Accounting Principles for Private Enterprises, which has fewer disclosure requirements for stakeholders.
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.
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. There is nothing to prevent you from making the conversion to the international standard at a later date, but be aware that a future change will involve further investment.
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 who can meet your needs.
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