Our Blog

TN CPA Professional Blog

The TN CPA Team is your source for the latest Canadian tax news and updates on changing tax laws.

We are pleased to provide a variety of resources on accounting, bookkeeping taxation, and other related subjects that we hope will be helpful to both individuals and businesses.

If you have any questions, simply contact us by email or call 416-318-6789. We will be happy to meet with you for a free, no-obligation consultation.


Font size: +
3 minutes reading time (510 words)

In Canada, what is the easiest accounting procedure for a small business?

For small businesses in Canada, simplicity and efficiency are key when choosing an accounting procedure.

According to the CRA, farmers, fishers, and self-employed commission agents can use the cash method or the accrual method to report income. All other self-employment income must be reported using the accrual method.

Here’s a step-by-step guide to setting up and using an easy accounting procedure:

  • Choose an Accounting Method
    • Accrual Basis Accounting: This method is generally the standard for business as it records revenues and expenses when they are earned or incurred, regardless of when the money is actually received or paid. This method provides a more accurate financial picture.
    • Cash Basis Accounting: Records revenues and expenses when they are actually received or paid. 
  • Set Up a Single-Entry Bookkeeping System
    • Single-entry bookkeeping is simpler than double-entry bookkeeping and can be sufficient for very small businesses.
      • Record Income: Keep a log of all incoming payments, including sales, interest, and other income.
      • Record Expenses: Track all outgoing payments, including operating expenses, salaries, utilities, and supplies.
      • Maintain Receipts and Invoices: Keep all receipts and invoices organized by date and category.
  • Use Accounting Software
    • Leverage accounting software to streamline your bookkeeping. Some popular and user-friendly options for small businesses include:
      • QuickBooks Online: Offers features for invoicing, expense tracking, and financial reporting.
      • Wave: Free accounting software that provides invoicing, accounting, and receipt scanning.
      • FreshBooks: Known for its easy-to-use interface, especially suitable for service-based businesses.
      • Xero: Provides a range of features including payroll, expense claims, and bank reconciliation.
  • Open a Business Bank Account
    • Separate your business and personal finances by opening a dedicated business bank account. This makes tracking income and expenses easier and ensures accurate financial records.
  • Implement Basic Financial Statements
    • Regularly prepare and review basic financial statements to understand your business’s financial health:
      • Income Statement: Summarizes revenues, costs, and expenses over a specific period to show profit or loss.
      • Balance Sheet: Provides a snapshot of your business’s assets, liabilities, and equity at a specific point in time.
      • Cash Flow Statement: Tracks the flow of cash in and out of your business over a period.
  • Automate and Schedule Regular Updates
    • Automate Data Entry: Use your accounting software to import bank transactions and automate data entry.
    • Schedule Regular Updates: Set a schedule for updating your financial records, such as weekly or monthly, to ensure accuracy and consistency.
  • Seek Professional Advice When Needed
    • While the above steps can help you manage basic accounting, it’s beneficial to consult a professional accountant or bookkeeper for:
      • Tax Planning: Ensuring compliance with Canadian tax laws and optimizing tax benefits.
      • Financial Advice: Getting insights into financial planning and business growth strategies.

Contact our office for professional advice when setting up your accounting system. It will save you time and money in the long run

Summary

By choosing cash basis accounting, using single-entry bookkeeping, leveraging accounting software like QuickBooks or Wave, and maintaining regular financial updates, small businesses in Canada can set up an easy and efficient accounting procedure. This approach helps ensure accurate financial records, simplifies tax filing, and provides valuable insights into the business’s financial health.

×
Stay Informed

When you subscribe to the blog, we will send you an e-mail when there are new updates on the site so you wouldn't miss them.

Do I Need a Balance Sheet for My Business?
Selling Goods Online May Result in Taxable Income

Related Posts

 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Sunday, 13 October 2024

Contact Us

Our Office

TN CPA Professional
4307 Village Centre Pl, Unit 104
Mississauga, ON
L4Z 1S2

 416-318-6789

 info@tncpa.ca

We're Easy to Find