It's spring and joggers are out enjoying the season.

Welcome to the spring issue of The Bookkeeper's Notes newsletter focusing on good bookkeeping practices.

If you are a regular site visitor, you know that Bookkeeping-Essentials.com is committed to educating and providing support to ... work from home business owners. I sincerely hope you find this newsletter useful and practical.

Otter enjoying the sun on a neighbour's dock at the lake.

Many year-round residents at the lake spend some of their time capturing wildlife. In this picture, the otters are enjoying sunning themselves on a neighbour's dock last September. Apparently one of the otters took up residence under their deck this past winter ... the odor was not too pleasant at times!

In this issue, I'll have you take a look at your balance sheet to see how healthy your business is, Worker's Compensation, along with news from the CRA and IRS. I've also included a link to a free 3 video series on Programming Yourself for Success.

I am asking my subscribers this issue if they will participate in a Product Development Survey. I would like your input as to what type of e-products you would like me to offer on this site. To participate in the survey, please click here.

Of course, this newsletter gives you access to the links of a handful of web pages that are password protected … my newsletter subscribers have exclusive access to these bookkeeping lists and procedures. You will need The Insider's Pass (a password) to access them, which you will find in the last section of the newsletter.

For work from home business owners doing their own books, I have introduced a new service … a general review of your ledger. This service will be for those who want assurance they are on the right track. I'll perform a high level review of your general ledger to see if there are any obvious problems. You may choose to have me walk you through the problems and how to correct them. If you are interested, send me a message on my contact form.

Bookkeepers interested in advertising on the Bookkeeping-Essentials's website, can place their ad by contacting me through my website.

It is my sincere hope that the information I provide on Bookkeeping-Essentials.com, and in this newsletter, will help you learn good bookkeeping practices to manage your business finances easily and more efficiently. It can be tough coming up with ideas on what to write about. If there is something you'd like me to cover, please drop me a line.

To your success! ... and, of course, thank you for subscribing to this e-zine.


Until next time,

Laura (aka Lake) :0)
Lakeshore Bookkeeping Services
BComm CPB


P.S. I would like to remind you there is a difference between information and advice. The general information provided in this e-zine 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 my site content for any reason whatsoever.




image of woman performing bookkeeping tasks on a computer courtesy of stock-xchng.com

In This Issue ...

  • Programming Yourself for Success - Free Video Series
  • Focus on Bookkeeping - How Healthy is Your Balance Sheet?
  • Focus on Payroll - Worker's Compensation
  • Recent Canada Revenue Agency (CRA) News
  • Recent Internal Revenue Service (IRS) News
  • In the Forum - Share Your Expertise
  • The Insider's Pass - The Current Password is Here








Free Video Series
Programming Yourself for Success

I want to invite my newsletter subscribers to experience a free 3 part video series by best selling author and coach Brian Tracy. This series can change your life forever.

Brain spent years studying success and developed formulas for achieving it. I first attended a Brian Tracy seminar in 1986. It changed the direction of my life and set me on a path to achieve my goals and my definition of success.

The first video is called “The 7 Rules For Peak Performance” and it's now available for viewing.

Want to watch it? Skip the reading and register here.

http://www.bookkeeping-essentials.com/LauraRecommendsBrianTracy

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Here is that link again:

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Focus On Bookkeeping - How Healthy is Your Balance Sheet?

So far we've talked about the importance of an audit trail and the importance of organizing your receipts. Both these areas are important to understand if you don't want to lose tax deductions during a government audit.

This issue, I thought I'd examine your balance sheet. Most small business owners intuitively understand their income statement ... but the balance sheet can be a bit of a mystery.

It's probably not a big secret that if you were to go to the bank for a business loan, your banker would want to see a set of financial statements. The balance sheet is of particular interest to your banker.

Your balance sheet contains information about the health of your business. It paints a picture of what the business owns and owes. While it doesn't reflect your sweat equity, it does reveal how much you have invested in the business personally.

Bankers ... actually any long term investors ... are interested in your chances of going bankrupt. Any weakness on your balance sheet could make it impossible for you to obtain financing.

What exactly are they looking at? Bankers want to know whether your business is healthy enough to take on more debt. They are especially interested in how much you have personally invested in the business and its earning power.

I can see you looking at your balance sheet wondering how can they figure that out? Here's where it gets interesting. Try this calculation.

Take your "total liabilities" on your balance sheet and divide it by your "total assets". Is the ratio you've just calculated high or low?

Owners that like risk tend to prefer this ratio to be high. Why? Because if the business fails, they can just walk away without taking too much of a hit. It should be fairly obvious that this would makes bankers very nervous. They want you to be invested in your business. For most businesses, bankers like this number to be 0.5 or less.

I mentioned that earning power is important. When they examine your balance sheet, they want to know if the business can generate enough cash flow to be able to make regular loan payments on time without jeopardizing the business.

So here is another calculation you might want to try ... you'll need your income statement for this one. Add your net income, interest expense and income tax expense (if you are a corporation) together. Divide this number by your interest expense.

What kind of ratio did you get? If this number falls below 1.5, there is a good possibility that your lender will stop advancing funds to your business. If it is 2.0 or higher, you are in good shape and have the coverage available to make it likely for you to meet your loan payment requirements.

If you are looking for short term financing, your banker would be interested in your working capital. It determines your ability to meet your debt obligations ... even in tough times. So let's calculate it. On your balance sheet, find your current assets. Divide them by your current liabilities.

If you got one for an answer, you have no working capital. The banker wants this number to be over one ... the higher it is, the better your chances of obtaining that short term financing.

To learn about more what your balance sheet can tell you about your business, click here.






Would you like to test your bookkeeping skills ... or prescreen a bookkeeper before you hire them? You can purchase this 300 question test including the answer key for $15 USD here ...




Focus on Payroll - Workers Compensation

In January, I did a bit of research on Workers Compensation after a question arose in the IPBC bookkeeping forum I belong to. The question posed was how do you determine if and when you have to pay workers compensation to the self-employed, subcontractors or independent contractors in the construction industry. I thought I'd share my findings that were published in the IPBC's newsletter.

Canada

As workers compensation is provincially regulated, each province has their own separate regulations. Sometimes you have to hunt around to find what you are looking for. Is there a way to make this search less painful?

A good place to start looking for information is the resource The Association of Workers' Compensation Boards of Canada (www.awcbc.org).

On this website, you can find the acts, regulations and policies for each province and territory as well as jurisdictional comparisons and website links to each board in Canada.

In all provinces "both a principal and any contractors or subcontractors of that principal are liable for assessments". In some provinces, it the principal's responsibility to ensure a contractor files a statement or ensures that a contractor pays ... or the principal is liable.

For example, in B.C., Saskatchewan and Ontario, you need to obtain a clearance letter to determine whether a subcontractor is registered with WCB and that his premiums are up-to-date. If a subcontractor is not registered or has fallen behind (has not paid the required premiums), you may be required to provide coverage. You can find links to obtaining a clearance letter for your province at awcbc.org> resources> employer resources> clearance certificates.

I really like the IPBC forums. They provide a wealth of information and lots of little pointers that make the differene between being an average bookkeeper and a great bookkeeper.

Here was something new that I learned from an IPBC bookkeeper in Saskatchewan. It was suggested that subcontractors ensure their contractors are in good standing before they take a job because, if not, in Saskatchewan they would be liable for a portion of the contractor's premiums. This is worth checking to see if it is the same in your province.

An IPBC bookkeeper in Ontario reminded bookkeepers that premiums were not assessed on board of directors who are not active in the business or subcontractors (such as bookkeepers) if their work was not performed anywhere on or near the job site.

If you are unsure of your position and don't want to speak directly with WCB, some provinces have legislated an Employers' Advisers (or Advocates) Office that work independently of WCB. In B.C., there is no cost to utilize their expertise as the cost to run their office is included in your assessed premiums. For more information, go to awcbc.org> Legislation / Policy> Legislation - Comparative tables> Workers Compensation Legislation A-Z> Advisors (Workers Advisors, Employers Advisors)> Appeals - Advisors> Employers' Advisors is on the second page.

WorkSafeBC offers the publication Small Business Primer - A Guide to the WCB which is a great resource for BC bookkeepers. You can download it for free and keep it on your desktop for easy reference. If you are not located in B.C. it may still be worth your while to glance through it. If anything pops up that surprises you, check to see if your province operates under the same rules.

United States

Workers Compensation in the United States varies from state to state just like it does in Canada. Private companies can find their state compensation board on the Department of Labor's website at www.dol.gov/owcp/dfec/regs/compliance/wc.htm.


Humour by Advice ... with Dr. Julia Chicken

Recent CRA News ... and other government news

A reminder that your soleproprietor return is not due until June 15th ... however, your taxes are still payable by May 2nd. If you need to estimate the amount you owe to avoid penalty and interest charges, find out about this free tax calculator.

Check out this tip if you can't pay your taxes.

In March, CRA has announced it is discontinuing combined income tax and GST/HST audits. They will also be changing their approach to GST/HST pre-assessments.

The changes are being made to enhance its focus on GST/HST compliance and will take place over a number of years. The first changes have already been implemented through a restructuring of the organization.

This isn't exactly CRA news. The Prime Minister announced a Red Tape Reduction Commission. The Commission has set up a new website with links allowing you to weigh in with your opinions and suggestions on cutting red tape for small business. If you feel strongly about this subject, you will want to check out the website at www.reduceredtape.gc.ca.

In the last newsletter, I mentioned that tax preparers can now submit the form T1013 Authorizing or Cancelling a Representative online. I tried out this new service and it is great. The turnaround time has been four days as promised rather than a 4- 6 week wait period. If you are a tax preparer and haven't started using this service, move out of your comfort and try it just once. Access to the service is through your Efile service located within your professional tax software package.

BC's new Premier announced changes to the minimum wage rate. Read more here.

Prescribed interest rates for the second quarter of 2011 were released and have held steady. The last rate change was July of last year when corporate rates for overpayment of taxes was introduced. Find the interest rate tables here ...

The Deloitte's March 31, 2011 Weekly Tax Highlights newsletter (it's free) explained what happens when there is a disolution of Parliament as occured on March 26. Here's how they explained it.

"All incomplete business in both the House of Commons and the Senate was terminated, including government bills ... The legislative proposals contained in the March 22, 2011 budget also “died”, but they may be reintroduced by the next government. It is noteworthy that the future federal corporate tax rate reduction to 15% as of January 1, 2012 remains intact at this time as this amendment was already enacted at dissolution. Outstanding draft tax amendments published by the government but not yet introduced into the House of Commons are not affected by the dissolution of Parliament. However, the decision as to whether to proceed with those proposals (as well as with the corporate rate reduction) will be made by the next government."


Recent IRS News

Your sole proprietor tax filing date is almost here ... by April 18th you must have filed your return and paid any taxes owing ... or completed Form 4868 requesting an automatic extension. It is important to remember that your taxes are still due on April 18th and must be paid if you don't want to incur penalties and interest charges.

The IRS has four payment options:

  1. Electronic funds transfer
  2. Credit or debit card
  3. The Electronic Federal Tax Payment System
  4. Check or Money Order

Check out this tip if you can't pay your taxes.

See the IRS Newsroom for more information on how to file for an extension and your tax payment options.

On April 5th, Congress passed the bill to repeal the 1099 2012 corporate reporting requirements as well as the 2011 reporting changes related to income from real estate. The President signed the bill into law on April 14th.

The IRS has published "Eight Things to Know If You Receive an IRS Notice ". You can find it by searching for IRS Tax Tip 2011-73 on the IRS website.

The IRS has issued a one hour webcast on The Small Business Health Care Tax Credit. To find out if/how you can afford the cost of covering your employees, go to their video portal located at www.irsvideos.gov . You'll find a wealth of other webcasts prepared specifically for small businesses.

You can find the 2011 depreciation limits for vehicles on Bookkeeping-Essentials's IRS News page.

The Social Security Administration and IRS released their spring publication for employers. Lots of good stuff in this publication/newsletter called The SSA/IRS Reporter. Two articles I liked were Tax Changes for Small Businesses and Spring Cleaning of Your Payroll Records. Find out more here ...

IRS interest rates increased by 1% for the second quarter of 2011 ... back to 2010 rate levels. Find the interest rate tables here ...





Ask a Private Bookkeeping Question

Purchase your private bookkeeping question here ...




In the Forum - Questions That Require a Second Opinion

Visitors like you have the option of sharing a great resource they've found, their bookkeeping experiences, or asking a question in one of the
Bookkeeping Forums.

Consider sharing your expertise in these forums. This question on paying employee commissions remains unanswered at this time. Do you know the answer?

Recent questions in the forum covered Bookkeeping for a Consignment Store, The Manual Bookkeeping Entry for a GST/HST Refund, and How to Pay Myself.

If you've used the forum and were happy with the help you received, please don't be afraid to tip me by making a donation! As more people ask questions, it takes more of my time. Your tip would not only put a great big smile on my face, … it would let me know that this service is useful and worth continuing.


The Insider's Pass

The Insider's Pass gives you access to the pages in Bookkeeping Essentials that are available only to newsletter subscribers ... my way of saying thank you.

Here's how it works. The pages listed below will only be partially viewed by all visitors. To view the entire article, you will need your Insider's Pass for access. The password will change with each newsletter … every two months. So if you ever forget, you will always find the most current password in your current issue of The Bookkeeper's Notes.

The current password is taxtime ... it's a reminder that your tax filing deadline is approaching. Have you got your books in order? ;0) It is case sensitive.

Here is a list of the pages which are password protected so that only my very important subscribers ... that would be YOU :0) ... have access.

Internal Controls
No password page
Password protected page

Bookkeeping Checklists
No password page
Password protected page

Common Journal Entries - Journal Entry Examples
No password page
Password protected page

Month End Procedures
No password page
Password protected page

Adjusting Entries
No password page
Password protected page

Monthly Financial Review or How to Supervise Your Bookkeeper
No password page
Password protected page




A last reminder to take a minute and please participate in my Product Development Survey, please click here.

This wraps up this issue of The Bookkeeper's Notes newsletter.

Comments? Ideas? Feedback? I'd love to hear from you. Just reply to this e-zine and tell me what you think!

If you like this e-zine, feel free to forward it to a friend. You'd be doing me a huge, huge favour. If a friend did forward this to you and you like what you have read, please subscribe by visiting my site.


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How to Use This Exam:

(1) As part of your interview process when hiring a bookkeeper.

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(3) As a practise test before writing your bookkeeping certification exam.

(4) To prepare for a job interview.




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From the Mail Bag
Visitor Comments



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PK Lethbridge, Alberta




My biggest problem in doing my books is keeping debits & credits straight in liability and equity accounts. I really liked the cheat sheet. (I think that will help me keep the debits and credits straight.)

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Carolann
CPB Bookkeeping, Inc.
"The Organizer"
Lake Worth, FL




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Red Deer, Alberta




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Thank you for providing valuable information regarding home business taxes on this website.

U.C., Toronto, Canada




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Tania, TaniasBookkeeping.org
Taking the worry away
Belledune, New Brunswick




BTW, did you say Bookkeeping? Cuz I fell asleep... just kidding!

Dr. Julia
www.advice-with-dr-julia.com

(I love her humour!)




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Alwyn Enterprises
Scarborough , Ontario




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Reliable Recordkeeping
Toronto, Ontario




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QuickBooks "one
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Edmonton, Alberta




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R. Keith Pierce, CPA, P.A.
I'll Sweat The Small Stuff For You - JaxTaxPro.com
Jacksonville, Florida