Hello! Looking to do my Corporate Income Tax and I'm running into something I'm unfamiliar with.
To keep it simple, I'll make up some numbers here, my business is construction, general carpentry and contracting.
Lets say this:
Total amount of money collected from clients: $120,000
Total amount of money spent on materials for clients: $20,000
Gross Income without accounting for material reimbursement from clients: $100,000
Total payroll cost: $40,000
Should have profit at: $60,000
In my "profit and loss" report it is saying:
Gross profit: $100,000
Material Expense: -$20,000
Payroll Cost: $40,000
Total Income: $80,000
I have the material cost set up as an expense in my Products and Services. I just now set it as 'non-inventory' which hasn't corrected the issue for previous profit and loss reports.
Wondering why it is saying the material reimbursement I'm paid is not part of my gross profit, but it then deducts it from my payroll cost.
My understanding is that it wouldn't be a part of my gross profit or expenses. I pay out $1,000 in materials and HST for a job, and I collect that exact amount when I invoice, which directly pays off the materials and HST I've purchased.
Thanks for the help.
