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Incomplete electronic records are creating difficulties for bookkeepers.

A complete record of all transactions is essential not only to keep track of how business resources are used but also because the Canada Revenue Agency (CRA) requires it. While today’s online transactions make purchasing easier than ever for consumers, they create headaches for bookkeepers responsible for business document records.

Online Information Is Difficult to Gather

As more transactions are done online (e.g., “tap and go” or credit/debit card purchases), gathering all the information required for bookkeeping is becoming increasingly problematic. Owners and employees need to understand what bookkeepers need and why they insist that appropriate documentation be available.

The CRA and other regulatory bodies need to be able to see the transaction data that supports the calculation of tax obligations and entitlements. The CRA insists that original paper, or in some cases a scanned copy, and electronic records be kept. Monthly credit-card statements do not contain sufficient detail of online transactions to determine the type of purchase and, therefore, the allocation to the correct general ledger accounts, whether the item was of a personal or business nature, whether the item was drawn by the owner, a debt repayment or a transfer to another account, or finally whether the GST or HST was charged to the transaction.

In addition, most bank statements do not provide information about whether deposits are owner contributions, transfers from other accounts, accounts receivable collected or reversals of errors, the type of expenditure, or whether withdrawals were personal, payments in full, payments on an account or payments to the government or employees.

Effectively Processing Electronic Data

While no single approach to bookkeeping will work for all organizations, the following are some ideas that may help you keep your books in compliance with CRA documentation rules:

  • Provide each employee with a list of allowable expenses and allocations with a brief description of each type of expense and the allocation category (auto, travel, entertainment) in the accounting system. This will help them know what they are allowed to charge to the company on their expense accounts, in accordance to company policy and business expenses allowable through the CRA.
  • Ensure each expenditure has an electronic note attached indicating the expense allocation.
  • Create folders for specific categories or suppliers and have electronic invoices saved by month in those specific category folders.
  • Develop a monthly spreadsheet of electronic invoices with a category breakout and a reference to specific electronic invoices.
  • Attach posting notes to the electronic document indicating the account allocation and/or the journal entry establishing that the document was posted.
  • Establish protocols for electronically filing the backup supporting the entries into the system. Manual systems incorporate alphanumeric systems to track customers and suppliers. Determine whether a similar approach is required to file electronic invoices.
  • Scan all incoming hard copy data and file it with the electronic data.
  • Create an audit trail of electronic information posted to the bookkeeping system by tracing through a customer invoice number or date. Ensure you can trace from the books to the electronic invoice and vice versa.
  • Maintain a record of the software format, operating systems and the hardware on which the data was recorded.

No Time Like the Present

An accounting and financial reporting system is only as good as the bookkeeping processes that record the original transactions. If the source documents are not available to support journal and ledger entries then, ultimately, in the financial statement and corporate tax returns, there will be problems establishing the veracity of the submissions.

Within a few years, all transactions will likely be virtual. Because it may take some trial and error to figure out how your business is going to manage and maintain virtual data, now is the time to get started.

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