# questions about corporate expenses



## cashmoneyflow (Jun 13, 2015)

Hi there,

I own a Canadian federal incorporation / small business and have some questions about expenses:

1) If my year end is December 31, and in 2014 I paid for a conference held in 2015, does the item get expensed to 2014 or 2015?

2) Is an HST remittance an expense, possibly under GIFI code 8760 Business Taxes?

3) Does capital expense vs. current expense have anything to do with the absolute cost of the item? For example, 
I bought a customized banner for $150.

4) Does rules regarding expenses for sole proprietorships/partnerships also apply to corporations?
e.g. GIFI 8521 Advertising (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html)

Thank you in advance!


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## amack081 (Jun 23, 2015)

cashmoneyflow said:


> Hi there,
> 
> I own a Canadian federal incorporation / small business and have some questions about expenses:
> 
> ...


1) Item is a prepaid expense, therefore expense in 2015.
2) HST refund/payments should be held as an accounts receivable/payable account not an expense.
For instance if you purchase office supplies worth $100 paying cash (assuming you live in Ontario where HST rate is 13%) the accounting would be as follows:

Debit: Office Expense: $100
Debit: HST receivable: $ 13
Credit: Cash: $113.

3) For an amount as small as this, I wouldn't capitalize the item, I would expense it in the year it was purchased.

4) Advertising (in CDN) would be expensed when occurred.


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## Russ (Mar 15, 2010)

Here's my view...

1) It is a prepaid expense (an unused asset) in 2014 that expires and becomes an expense in 2015. Therefore expense it in 2015.

2) An HST remittance is the settling of a liability (HST collected less HST paid). It is not an expense.

3) Theoretically an item that benefits more than one year is a capital item, but small value items can be expensed regardless. What is small value? There is no specific rule. Expensing a $150 item would likely be ok.

4) In general expenses are the same for a corporation and a proprietorship. Can't think of any exceptions at the moment.


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## cashmoneyflow (Jun 13, 2015)

thank you Russ and amack081!


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## cashmoneyflow (Jun 13, 2015)

hi again,

I wanted to clarify something. What confused me to begin with and got me thinking that HST remittances are an expense are these lines from the CRA:

"The expenses you can deduct include any GST/HST you incur on these expenses less the amount of any input tax credit claimed" and later it says "When you claim the GST/HST you paid on your business expenses as an input tax credit, reduce the amounts of the business expenses you show on Form T2125, Statement of Business or Professional Activities, by the amount of the input tax credit. "

source: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html

...so does this only apply to sole proprietorships/partnerships that use form T2125? Is there any form equivalent where corporations have to show the difference b/w GST/HST incurred and ITCs claimed (or that's the balance statement?)

Thank you in advance for clearing up this confusion!


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## Homerhomer (Oct 18, 2010)

No, if you are registered for hst then the remittance is not an expenses.

Think of it like this.
You collect hst from your client of $100, the $100 is not your revenue, you are simply acting as a broker on behalf of the cra, the funds are not yours, you are simply temporarily holding it on behalf of the cra, it is your liability.

Your busines now spends some money on which you paid $30 worth of hst, the $30 is not your expense, but cra allows you to reduce the amount you will pay to cra by $30, so now instead of owing $100, you only have to pay $70.

The business you made purchases from has to remit the $30 collected from you..... and so on. HST is handled the same way for sole proprietors or corporations.


ps, given the questions you ask I suggest getting accountant to help you out.


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## Russ (Mar 15, 2010)

cashmoneyflow said:


> "The expenses you can deduct include any GST/HST you incur on these expenses less the amount of any input tax credit claimed" and later it says "When you claim the GST/HST you paid on your business expenses as an input tax credit, reduce the amounts of the business expenses you show on Form T2125, Statement of Business or Professional Activities, by the amount of the input tax credit. "


Here's how I would interpret this:
If a proprietorship or a corporation is an HST registrant, any HST paid is a part of expenses except any part of HST paid which is claimed as an input tax credit. So if an expense item costs $100 before HST ($113 with HST included), you can include $113 as expense and forego the input tax credit, or you can include $100 as expense and claim $13 input tax credit. In this latter case, your expense is $113 less $13 = $100. It is more advantageous to claim the input tax credit than to include the HST as expense.

If a proprietorship or a corporation is not a registrant, HST is not collected, input tax credits are not claimed and the entire $113 is an expense.


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## cashmoneyflow (Jun 13, 2015)

Thank you Homerhomer and Russ!


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