CRA Does Not Make the Accounting Rules

Most of my client are more interested in tax rules than accounting rules.  When I review financial statements with my clients, they want to know how much income tax they owe, and whether or not they made any money. They are not interested in the presentation of the statements or the note disclosure.

The Canada Revenue Agency (CRA) administers the tax rules. They have rules like, only 50% of business meals and entertainment can be deducted for tax purposes. This rule does not affect the meals expense on the income statement. It will still be 100% of the meals.

The 2020 example is; the CEBA loans any business who received $40,000 in 2020 is paying tax on $10,000 in 2020. That is the tax rule. For accounting purposes that $10,000 will not be earned until 2022 when the loan is repaid. The grant portion is taxed in 2020 and earned for accounting purposes in 2022.

Remember, an accountants’ goal is to help business owners make money. CRA’s goal is to separate business owners from their money. Different goals, different rules.

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