2016 is coming to a close. Accountants celebrate the end of the year with inventory counts and odometer readings.
We are not the only ones who should be counting inventory, however. If your business is not incorporated then you have a December year end, which means that you need to know the cost amount of any inventory that you have on hand at the end of the year. Inventory is defined as any product that you have for sale that you still have. Another way to look at it is stuff that no customer has purchased yet. You are required to count inventory at least once a year and your year end is a good time to do that.
If you have inventory on hand that you cannot sell because it is damaged or no longer useable – think 2 week old milk – then you don’t have to count that inventory. If you want a tax deduction however you have to throw that inventory away. Think about that. If you count the inventory then you don’t get a deduction for it. If you throw the inventory away then this amount will be recorded as a cost of sale expense.
Also if you plan to take a deduction for your vehicle use this year then you should be using your smart phone to take a picture of your odometer reading at the end of the day on December 31.
I particularly like the idea of having a visual record of your odometer reading. As all your pictures are dated we have excellent documentation of the odometer number at year end, and who does not need good documentation around their mileage log. Many people can benefit from more credibility in this area.
If you have a picture of the odometer reading at the beginning of the year and a picture at the end of the year, then you have a rock solid number for how many kilometres you drove in the year. This is a good start – the number of kilometres you have driven for business is a more subjective number because it is dependant on how good your notes are about where you went and why it was a business trip.
Start 2017 off on the right foot by getting that odometer reading and then you could make a resolution to keep really good records about your driving the rest of the year.