Whether it’s a new car, a truck or tractor, a suite of computer equipment or some other large scale item – when you pay for these things with finance, there is some information that you should provide to your Accountant!
Significant items, such as the ones mentioned above, need to be capitalised and depreciated in your financial statements – but the finance transaction also has an impact with regards to an interest deduction.
I always recommend the following:
- if you are not sure how to process the transaction in your accounting system, contact your Accountant for their advice – this will help ensure you claim the correct GST throughout the year, and avoid unnecessary amendments at year end
- enter as much detail as you can in the “Memo” section in your accounting system – this includes make and model information, as well as registration numbers if applicable
- keep a copy of the invoice in a separate “year end” folder to give to your Accountant – this makes it easier (read – cheaper) for them to get any information they need without them having to come back and ask you
- also include a copy of the “finance summary” with your “year end” folder – the “finance summary” will provide details of any charges by the finance company, the number of payments and the amount of payments as well as the total interest for the term of finance
If you need help creating a “year end” folder, or processing these transactions, Contact The Tax Chic!