Entering Data Off Of Bank Statements

by Brenda

Do I need my receipts?

Do I need my receipts?

I have an interesting question.

Do you think the CRA will accept bank statements instead of receipts? In other words, if I pay all of the gas through debit, do you think that it's ok not to have that gas receipt that has disappearing ink?

The bank statements clearly show the money was used only for gas. Same for other receipts. What are your thoughts?

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Brenda, that's a great question!

In my chat on Audit Trails, I talk about the proof that CRA requires to validate an expense deduction if/when you are audited.

CRA requires you to provide two things to support your expense deductions:

1. Proof of purchase
2. Proof of payment

Your bank statement or credit card statement could prove proof of payment ... although your actual payment receipt would be better. However these statements don't provide proof of purchase.

I'm guessing your thinking ... Huh, why not?

Let's look at your example of purchasing fuel at a gas station. You feel that showing the purchase on your bank statement proves you purchased gas for your vehicle.

Think about it for minute ... how many times when you've purchased gas for your car have you also purchased:

- A car wash ... which is taxed at a different rate than fuel?
- A snack, pop or coffee ... because you don't have time to stop for lunch?
- The newspaper ... who doesn't like to keep up to date on current events or do the daily crossword puzzle?

All your bank statement shows is that you purchased something at a gas station. It doesn't show what you purchased.

The other thing a statement won't show is the GST/HST charged and paid.

Take some time now to learn what CRA requires for a receipt to be valid. You'll also find out information on what is considered NOT legitimate for tax purposes.

Another thing to remember when/if you claim input tax credits (ITCs) ... you MUST have a legitimate receipt to support the claim. Without the receipt, the CRA auditor can and does deny ITCs without supporting documentation.

Perhaps you are thinking ... no biggie ... but stop and think again. If the auditor is looking at three years and denies any claims without supporting documentation ... you could be in one big pile of financial "do-do". Sometimes the hole is so big, a business owner ends up shutting down a profitable business because of sloppy bookkeeping and record keeping. Take the time to organize your receipts.

Your concern about receipts printed on thermal paper is a valid one. What I do is scan these receipts BEFORE they fade.

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.

Comments for Entering Data Off Of Bank Statements

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May 21, 2014
Missing Receipts
by: bookkeeper

Yes good answer, but do you request missing receipts from the client. My expereince is that the client gets very annoyed when I request these, new ones next month, etc.

What is your procedure to track down missing receipts?

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I sure do ask for missing receipts. That's part of the reason someone hires me ... to make sure their records / books are in good order.

I don't get too many clients who are outright annoyed ... frustrated - maybe ... as I try to explain the rules surrounding tax deduction claims. If they don't meet the criteria, the "business expense" becomes not deductible for tax purposes ... taking money out of their pockets essentially. There is always a learning curve for new business owners as they probably weren't thinking about recordkeeping when they started up their business.

You can see how I deal with the "no receipts" issues here.

Just remember to remind them why they hired you and how you can help them. Don't let them make you feel guilty because they shirked their responsibility over maintaining business records that meet CRA's requirements. It's not your problem when a business owner leaves easy money on the table. Organizing records is 90% habit. You just have to help your clients develop the right habits.

Sep 10, 2014
Credit card statements
by: Julie, Calgary, AB, Canada

I'm using AccountEdge a new software where a new year is started every year. (June 1)

I am entering data off of bank statements but the June statement has entries from May. The program doesn't allow me to enter anything before June 1st.

Do I enter the May entries as of June 1st then. Also these will then belong to the new year entries instead of the previous year. Am I doing it correctly?

Sep 10, 2014
Credit card statements
by: Lake

Hi Julie,

It sounds like you have started a new set of books using new / different software.

Your first step is to enter in all your opening balances using the trial balance from your prior year. In your case, this means you want to print off the trial balance as of May 31.

Once you have entered and balanced your opening balances, your can then start doing the bookkeeping for the current fiscal year.

This means that you will not have to enter in any of your May entries. In fact please make sure you don't. Why? The May expenses were already accounted for and claimed in the prior fiscal year. Reentering them in the current year would be double counting.

All your May entries should be already included in the opening balance you set up. You also want to note that an important accounting concept is to match revenues with expenses. You cannot just decide to include some prior year expenses in the current year instead of reporting them in the prior year where they belong.

Part of your year-end procedures is to look at the first month statements of your current fiscal year to determine if you have captured all your prior year expenses and revenue. Once you have done your cutoff procedures, then you can submit your books to the accountant.

If you have already closed your prior year and filed, you need to decide if you want to amend your return for the expenses missed.

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