Transaction Date

What is the correct transaction date?

What is the correct transaction date?

Enter invoice date or the date the cheque is cashed?


Hi all,

I have run across a purchase invoice which is dated on July 25, while the date the cheque was cashed on bank statement is on Aug 2.

I am not sure which date should I enter in the purchase invoice journal in simply accounting.

If I enter the invoice date, the bank statement for Aug will not be consistence with book, and it will give some trouble on making the monthly bank reconciliation. If I enter the date on the bank statement, the expense actually does not exist in Aug instead of July.

Does anyone know which date I should enter while avoiding the drawback I said above?



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I am not familiar with Simply Accounting software any more ... but I am going to assume that it functions similar to QuickBooks with regards invoicing.

A good bookkeeping practice is to enter your purchase invoices into your Accounts Payable module using the date of the invoice ... in this example July 25. This will create the entry:

Debit "The Appropriate" Expense Account

Credit Accounts Payable

When you write the cheque to pay the invoice, you would do this through the Account Payable module not your Banking module. Paying the bill would then create this bookkeeping entry:

Debit Accounts Payable
Credit Cash in Bank

Assuming the cheque was written in July but did not get cashed until Aug 2 as you say, then your July bank reconciliation will show the cheque as outstanding. When you prepare your August bank reconciliation, the cheque will have cleared.

Hope this explanation helps you understand how your bank reconciliation works.

Comments for Transaction Date

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Feb 02, 2012
 Date to record credit card transaction
by: Yes Man, Toronto, Ontario

An expense by credit card happened on January 19.

The credit card bill came on time but was not due till February 19.

Do I enter it when it happened or when I paid the credit card bill?



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You record an expense on the date of the invoice / receipt ... in this case January 19. Make sure you input each item on the credit card statement that pertains to business and that you have a receipt for separately. By this I mean, do NOT lump it together in one line.

When you pay the credit card amount in February, you record it on the date you make the actual payment, not the due date.

Hope that helps.
Sep 12, 2015
 Opening Balance
by: Anonymous

I have a ledger from my landlord which begins with a title BALANCE FORWARD =$0.00. then three lines later there is a journal entry which says OPENING BALANCE.....if there is a balance forward of zero wouldn't the opening balance also be zero?

THE FIRST LINE STATES:
DATE: 06/01/13
TRANSACTION: - - - -
CHARGES: Balance forward
RECEIPTS: 0.00
ENDING BALANCE: - - -

THE SECOND LINE STAES
DATE: 06/01/13
TRANSACTION: RENT
CHARGES: $1,061.60
RECEIPTS: - - - -
ENDING BALANCE: $1,061.60

THE THIRD LINE STATES THE FOLLOWING:
DATE: 06/01/13
TRANSACTION: " OPENIN BALANCE"
CHARGES: - - - - -
RECEIPTS: - - - - -
ENDING BALANCE : $2,636.85

THE FOURTH LINE STATES THE FOLLOWING:
DATE: 06/10/13
TRANSACTION: Received
CHARGES: - - - - -
RECEIPTS: $1,061.60
TRANSACTION: BALANCE FORWARD : $1,0175.25
Sep 12, 2015
 Opening Balance
by: Lake

I think you need to ask your landlord to explain the statement and what the the additional charges relate to.

Simple math if you ignore the opening balance is:

$2636.85+1061.60 = 1576.25. What is the 1075.25 all about?

Does the "statement" just represent the one day? Could s/he print you a statement for the whole year? ... it might solve the mystery.

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Cash or Accrual Basis

by Melanie
(Hamilton, ON, Canada)

Accrual Basis of Accounting and the Matching Principle

Accrual Basis of Accounting and the Matching Principle

This is an airheaded question:

Do we do bookkeeping on the cash basis or the accrual basis? This is my reason for asking:

I am starting work on a new file that I took over. The previous bookkeeper did the file by entering it on the cash basis for the past 20 years.

I don't know if I am making a big deal out of this by asking this question but from all this, I am completely frustrated by the looks of the accounting system and how to proceed with it. It seems awkward to me.

If I am to start working on the file on the accrual basis, how do I convert it to the accrual basis after it has been done on the cash basis for 20 years.

As a bookkeeper, what steps or courses of action should I take to fix this?



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Hi Melanie,


I chat a bit about cash vs accrual accounting in three spots on the sites:

Cash basis of accounting vs accrual basis of accounting

Who can use cash basis of accounting in Canada?

Cash basis not a good reflector of the health of a business (see comments in this forum post)

A good place to start doing the books on an accrual basis is to:

1. Set up our opening balances at the last day of the previous year.

2. Ask your client to draw up a list for you of their existing accounts receivable and accounts payable. Use this list to "adjust" your opening balances on the first day of the fiscal year as these would not have been recorded/captured under the cash basis of accounting.





Publisher's Note: This post was initially published under "Unanswered Questions" so that other bookkeepers could weigh in on how they handled this.


P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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Dec 07, 2011
 How to Invoice for Bookkeeping?
by: Blake, Coombs

If I completed the bookkeeping for year end Dec 31, 2008 for my client and their accountant wants me to put in an accrual for my bookkeeping fee of $700, how should I invoice for this later on to receive my $700 fee?

Do I back date my invoice and date it as Dec 31, 2008 or can I just put today's date on it?

How does CRA deal with this problem of accruing fees and later invoicing for them?

If CRA sees my invoice dated at today's date, will they assume that the expense was incurred as of today and disallow my fees for my client for 2008?

This is a very hard problem for me to deal with and my head is just going bizerk over it.



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Hi Blake,

In Canada, businesses must do their books according to the accrual method of accounting as opposed to the cash basis of accounting ... the exception is farmers and fishermen. (See the posting above for links which explain cash vs accrual accounting.)

One of the principles of the accrual basis of accounting is the matching principal which says to match costs with revenues. (Follow the link for a more in-depth explanation.)

The accountant is basically asking you to match the expense for doing the 2008 books to the year the income was earned. This requires the accrual you outlined above.

The accrual will be reversed once the invoice is issued, so it will carry forward in the accrued liabilities account on the balance sheet for 2009, 2010 and 2011.

You will submit your bill to your client for payment. When this is done, the 2008 accrual will get reversed and the actual invoice for 2008 services performed in 2011 will be recorded to accounts payable.

Does that make sense Blake?
Dec 07, 2011
 Accrual Accounting and The Matching Principle
by: Blake

So, basically it doesn't matter what date I put on my invoice - this accrual will already be reflected in the 2008 period no matter what (just as long as the matching principle has been met)?

This is good on my part because it won't screw me up if I had back dated my invoice, but it seems like I wouldn't be matching my income and expenses or not?

Is this ok with CRA that I have dated the invoice in 2011? What will they want to know about it? What description should I put on the invoice?

Right now, I have dated my invoice as Dec 7, 2011 and my description I have put "Bookkeeping for the Dec 31, 2008 financial year end". Is this ok?

Thanks.



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Blake,

Do not confuse your client's record keeping with your own.

It does matter when you invoice your client if you want to match YOUR expenses with the revenue that created those expenses.

You want to bill your client when you complete your job. If the task was large, you may even consider doing progress billing.

Your description of your services is accurate, so no worries there.

I just want to reiterate what is happening on both sides.

YOUR December 2011 books should be showing $700 in Revenue, any sales tax billed (if applicable) in GST/HST Payable, offset with $700 plus sales tax if applicable in Accounts Receivable,

Your client's books in December 2008 should show Accrued Liabilities of $700 plus applicable sales ta offset set by $700 in professional fees excluding applicable sales tax (if any) in GST/HST Payable.

Make sense?
Dec 08, 2011
 Am I understanding it now?
by: Blake

So just to confirm CRA won't go after my client if they see that the bill was dated as Dec 7, 2011 and recorded in the Dec 31, 2008 year end?

My client would get mad if this happened. So to see if I am on the right track the entry would be:

1. On my books:
On Dec 7, 2011:
DR. Accounts Receivable $784
CR. Sales $700
CR. HST Payable $84

2. On client's books for Dec 31, 2008 year end entry:
DR. Accounting $700
CR. Accrued Liabilites $700

3. Then for Dec 7, 2011 invoice to be recorded on Dec 7, 2011 in my client's books:
DR. Accrued Liabilites $700
CR. Accounts Payable $784
DR. HST Receivable $84

4. As payment comes in the future is it recorded like this??? - say I receive in Jan 16 of 2012
On my books on Jan 16, 2012 it would be:
DR. Bank $784
CR. Accounts Receivable $784

5. On client's books on Jan 16, 2012 it would be:
DR. Accounts Payable $784
CR. Bank $784

6. Do I charge GST 5% or HST at 12% to my client? I did my invoice at 12% HST but have not mailed it out yet.



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Blake,

6. You charge HST on bookkeeping services IF you are a GST/HST registrant ; none if you aren't.


3. My preference is also to actually reverse the accrual from 2008 and book the actual rather than just DR Accrued Liabilities. I think it makes it easier for other's to see what has happened and reduces the possibility of clerical errors ... just my preference ... doesn't make your entry wrong.

All the rest looks great to me.
Dec 08, 2011
 Audit Fees Bookkeeping Entry
by: Mary, Toronto

What would be journal entry for Auditor's fee incurred this year for previous years' audit? We follow accrual basis of accounting.



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Hi Mary,

You want to accrue your audit fees in the prior year's books ... check to make sure your accountants haven't done this for you already .. by journalling:

DR Professional Fees (expense account on the income statement)
  CR Accrued Liabilities (current liability account on the balance sheet)

Reverse the journal in the current year. When you receive the auditor's invoice, just process it normally as follows:

Receive the Invoice:

DR Professional fees
  CR Accounts Payable

Pay the Invoice:

DR Accounts Payable
  CR Cash in Bank
Dec 08, 2011
 Prior Year Loans
by: Florine, Baltimore, MD USA

How do I book a prior year loan--what is the proper entry? There are no principal payments.



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Hi Florine,

Are you saying the loan was not booked in the prior year or are you wondering if you have to do anything with the account balance come this year-end, assuming you have been recording interest accrued and/or any payments on the loan throughout the year?

What was the purpose of the loan?
Dec 08, 2011
 Some clarification
by: Blake

Yes, I am an HST registrant.

So did you mean to record like this on Dec 31, 2008:
DR Accounting 700
DR GST Receivable (Don't know what rate to charge)
CR Accounts Payable 700 + GST or HST (instead of to accrued liabilites)

What if their accountant is working on the backup copy already ie I've given a copy to them before even doing up my Dec 7, 2011 invoice but have set up my $700 accrual in backup copy.

Also, is this ok with CRA??? I really don't want my client to get into trouble from the invoice dating. I just want to do it right.

Any suggestions please on CRA would be great! I am not sure if I am doing this right to satisfy CRA's compliance. Any suggestion would be great!!



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Blake, you need to stop sometimes and try to understand what it is you are doing. You keep asking about CRA. CRA expects your starting point to be accrual accounting.

Ignore the taxes in 2008 accrual. If want, send a note about your concern.

If you are truly unsure if your work is correct, ask the accountant to double check that you made the entry correctly. Accountants don't bite .... well most of them anyway! ;0)
Dec 09, 2011
 Auditor's fee
by: Anonymous

What if there was no journal entry made to accrue the auditors fee last year? In that case, do I simply enter the bill and make payment as current year expense?



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Yes if the amount is immaterial.

It is a self correcting error. This means over a two year period, your statements are correct. However, in "year one" your net income is too high and in "year two" your net income is too low.
Dec 06, 2012
 Accrual ? Cash?
by: Anonymous

Hi,
What are requirements for the Canadian corporations - accrual basis of accounting or cash basis of accounting and reporting?
Dec 27, 2012
 Follow the link
by: Lake

Hey Anonymous,

Page up to the top of the page and follow the link that says " Who can use cash basis of accounting in Canada". It has the answer to your question.
Jul 04, 2014
 HST Reporting
by: Anonymous

Hi, I have a basic question on HST reporting. Currently the business is not generating revenue now, but is incurring expenses including HST. However, some of the bills are paid immediately and some have not been paid (such as internet). Should the HST report to CRA on a monthly basis show the HST paid (and as a result owed to the company) on a cash or accrual basis?

Thank you.



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Only farmers and fishermen can use the cash basis of accounting in Canada. You prepare your GST/HST report using accrual based accounting.

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