Accounting Issues Faced by Small Business Owners in Canada
Question 1:
Do I still need to keep original receipts for expenses paid using the company's bank or credit card account?
Yes, it's best to keep them.
Although bank statements can record some expenses (such as gas purchases and software subscriptions), for fixed assets, travel expenses, and items used in product production, you need to keep original receipts and note their business use. You can use accounting software or your phone camera to take pictures of receipts and then dispose of the originals. While keeping detailed records of travel, meals, and entertainment expenses may seem tedious, carefully tracking receipts ensures you don't miss potential deductions.
Question 2:
Can the company pay for the owner's gym membership?
Generally, no. Gym membership fees are considered personal expenses. However, if the company creates a private gym on its premises and makes it available to all employees, the costs for these facilities can be deductible.
Question 3:
Can personal medication expenses be treated as company expenses?
No, personal medication expenses can only be claimed as medical expenses on your personal tax return and cannot be paid through the company's accounts.
Question 4:
Can clothing, uniforms, or other work attire be deducted? What qualifies as a uniform?
If uniforms or special work attire are necessary for your job and not suitable for everyday wear, their costs and maintenance expenses can be deducted, including laundry and dry-cleaning costs. As a business owner, you can maximize deductions if:
You provide employees with clothing bearing the company logo.
You provide employees with necessary safety clothing.
You provide employees with standardized branded and appearance clothing.
Question 5:
I have a car used for business, but the car loan is in my name. I've been paying the loan from the company account. Can I continue to pay the personal loan from the company account?
No, the car loan should match the name on the payment account. In this case, transfer the car loan and payments to the company's name. If you keep the loan in your name, you should pay the loan from your personal account and then deduct the business use mileage and other car expenses on your personal tax return.