I have a number of clients who are incorporated and I can not figure out how to exclude "other expenses" from the income that flows to the balance sheet. For example when the corporation pays income tax it is an expense but not a deductible expense. Does anyone know how to fix this!!
Let me help share some insights about the profit & loss and balance sheet.
Currently, there isn't a way to exclude "other expenses" on your P&L and Balance Sheet. The only workaround you can use is to assign classes on your transactions to track specific expenses and handle occasional expenses that aren't necessarily associated with a particular account type.
You can perform these steps if you want to use the class tracking feature:
Next, you can set up class categories for your expenses and accounts:
Once you use class tracking, you'll get an excellent overview of your financial reports. This will categorize transactions by generating a report by class. You can refer to this article for details: Filter, sort or total reports by Class.
Keep me posted if you have other questions about your financial reports. I'll be around to help.
Not really certain as to what your problem is, other than you may be confusing financial reporting vs tax reporting.
The P&L statement is a financial statement of for the company outlining revenues and expense for the reporting period of which corporate tax is a valid financial expense to be included in the calculation of net income along with 100% of meals and entertainment expenses, fines and penalties, and amortization.
The companies T2 is for tax reporting purposes, Schedule 1 of the T2 is where you adjust reported net income from the P&L report that you enter on S125 for tax purposes use CCA vs Amortization, reduce M&E expenses to 50% and etc. The total from S1 is then entered on line 300 of the T2 to complete the tax calculations for the year.
Unless you are referring to instalment payments on the next year end tax, in which case that would not be reported as an expense, but rather as a debit entry to the Corporate tax payable current liability account.
Thank you both for your thoughtful responses. I understand the difference between financial reporting and tax reporting. I think I was hoping there was a way to have the P&l reflect the expenses as on the T2 so that my retained earnings would be updated properly at the end of each year. If there was someone to do an adjusting entry to have everything balance when it is sent off to the person preparing the T2.
Your retained earnings reported on QuickBooks financial reports will be correct.
The tax calculations and adjustments on the T2 and other schedules do not adjust amounts reported on the S100 - balance sheet or S125 - income statement (P&L) for the current or prior years. They only determine the tax liability for the company for the year.
Usually if there are significant differences (particularly from CCA calcs) you would prepare a reconciliation schedule for clients.