As a company or a self-employed worker, you have to report your real estate income. To do so, you must keep your book of accounts up to date. Your accounting is an important part of your property management, and it should not be neglected.
Here Are 3 Good Reasons to Do Your Accounting Well:
- Comparing: By being on top of your accounting, you will be able to see the progress of your properties and their profitability. You can track your company’s past and current financial situation, which is key in the real estate industry!
- Planning: Tracking your financial situation will allow you to make better financial decisions. Indeed, they are based on your company’s current financial situation, which means you need to have the right information!
- Saving Time: Having your bookkeeping up to date ensures that you will not be caught off-guard if your company is subject to a government inspection. Imagine having to update a poorly-maintained book of accounts… What a long and painful task!
Remember that you must keep your documents and vouchers for at least 6 years! Make sure that you keep the following documents:
- Invoices (paper or electronic versions);
- Income and expense reports;
- Payroll records;
- Records of taxes collected and paid;
Generally speaking, in Canada, the recognized accounting method is the double entry bookkeeping system. Thus, every transaction is written twice (as a debit and a credit). This method makes it easier to verify your accounting because the debits and credits must correspond. Example: when you buy office furniture, your “furniture” asset increases, which is a credit, and your bank account decreases, which is a debit (or your credit card plan account increases because you owe the sum to the supplier).
Assets vs. Operating Expenses
- Assets: They will be used in the short or long term for your company. For example, office chairs and decorations are considered assets because they will be used for many years, same thing goes for hardware. These elements will depreciate as years go by.
- Operating expenses: They are all paid during the fiscal year (example: from January 1st 2019 to December 31st 2019). For instance, electricity, insurance policies, salaries, publicity, etc. are operating expenses. These are the costs incurred to sell your product or service.
If you use Proprio Expert, do not worry! We offer an accounting training course. And if you still struggle, we can come to your home, or you can come to our office for in-person training! Hiring a professional accountant or knowing someone with accounting experience is always a good thing!