DOING YOUR OWN BOOKWORK – DO YOU KNOW HOW?
One of the major concerns to our firm is client prepared accounts. Because to prepare a set of accounts you have to know taxation legislation.
When we take a client prepared set of accounts ie Quickbooks, we can only rely on the work as prepared as we dont see the source document, we are unable to decide whether the client has entered the transaction properly.
It is very important that clients are aware that we do not check their work, and unless something becomes obvious we carry on unaware of errors or omissions. The problem arises when the Taxation Office starts asking for source documents that make up certain types of expenditure items.
It is our experience that any costs in properly preparing financial accounts that form the basis of taxation structures will be cheap compared to a taxation audit result.
Please answer the following question with Yes and No. If you answer No, to five of more questions you most certainly will both breach Tax Legislation and increase your professional Fees.
1. Do you know the difference between cash & accruals?
2. Do you understand the meaning of capital gains?
3. Do you know the difference between assessable & non-assessable income?
4. Do you know the difference between taxable and non-taxable income?
5. Do you know what capital income is?
6. Do you now what personal services income is?
7. Do you know how to account for insurance recoveries?
8. Do you know what a dividend is?
9. Do you know how to treat a dividend?
10. Are life insurance premiums deductible?
11. Do you know what a taxable supply is?
12. Do you now when you are able to claim GST back on a payment made?
13. Do you understand the term “adjustment”?
14. Do you know how to account for trading stock?
15. Do you know how to calculate an employees wages?
16. Do you know how to calculate an employees entitlements?
17. Do you know when and how much to withhold under PAYG Withholding system?
18. Do you know what constitutes exempt income?
19. Do you know what a capital asset is?
20. Do you know the record-keeping obligations for a capital assets?
21. Do you know what an asset register is?
22. Do you know how to maintain an asset register?
23. Do you know what a building improvement is?
24. Do you know how to account for a building improvement?
25. Do you know the difference between a repair and a capital purchase?
26. Do you know what a valid tax invoice looks like?
27. Do you know what are allowable deductions under s8-1 of the ITAA1997?
28. Do you know the limitations on deductibility of certain expenses?
29. Do you know the difference between capital and revenue expenses?
30. Do you know the meaning of private or domestic expenditure?
31. Do you know when uniforms and protective clothing are deductible?
32. Can you claim expenses relating to home office?
33. Can you claim travel expenses from home to work or vice versa?
34. Do you know the meaning of apportionable deductions?
35. Are interest expenses deductible?
36. Are self education expenses deductible?
37. Do you know how to account for bad debts?
38. Are legal expenses deductible?
39. Are borrowing expenses fully deductible when incurred?
40. Do you have to pay superannuation for all employees?
41. Are land and water rates fully deductible?
42. Do you know the difference between full-time, part-time and casual staff?
43. Do you know what percentage of a staff members wage is payable in superannuation?
44. If you work from home can you claim all your household expenses such as telephone, gas, etc?
45. Are entertainment costs deductible? Do you know how to account for monies received in advance of work being performed?
46. Do you understand what shareholder accounts are?
47. Do you know what fringe benefits tax is?
48. Do you know the difference between an employee and a contractor?
49. Do you understand the term PAYG Instalments?
50. Do you know how to account for transfers between entities?
51. Do you know what is meant by input tax credits?
52. Do you know what is meant by partly creditable acquisitions?
53. Do you know what GST-free supplies mean?
54. Do you know what a supply of going concern is?
55. Do you know what an input taxed supply is?
56. Do you know what stamp duty is?
57. Do you know how to account for stamp duty?
58. Do you know the difference between a lease, loan or hire purchase agreement?
59. Do you know how to account for them?
60. Are you prepared to reconcile monthly all bank accounts?
61. Are you prepared to record transactions in a constant manner and logical manner?
62. Are you prepared to record transactions from source documents so that the recording reflects such source documents?
63. Are you prepared to record adequate memos so that persons using your accounting can easily and properly understand each transaction?
64. Do you understand the accounting and GST requirements and differences between lease, hire purchase and chattel mortgage?
65. Do you understand the tax rulings on what constitutes repairs and maintenance?
66. Do you understand the meaning of “expenditure incurred in earning assessable income” and understand section 51?
67. Do you understand Fringe Benefits Tax?
68. Do you understand Capital Gains Tax?
69. If you operate a company do you understand division 7A of the ITAA1997?
70. Have you an understanding of part IVA of the ITAA1997?
71. Do you know that the accounting treatment of a transaction will be taken by the ATO as its intended treatment?
72. Do you know how to calculate and process private portions on certain expenses?
73. Do you know how to include cash expenses?
74. Do you know how to include credit card expenses?
75. Do you know how to treat a cancelled or “bounced” cheque?
76. Do you know which TAX CODES apply to Income, Expense and Capital?
77. Do you know how to calculate wages/holiday pay?
78. Do you know how to complete a BAS?
79. Do you know which tax code apply to G1, G3, G10, G11,W1, W2, 1A, 1B, 5A, 5B, 9A?
80. Do you know the difference between PAYG IAS BAS/ IAS BAS/ PAYG BAS/ BAS?
81. Could you answer the ATO if they rang to query you about your work?
82. Would you be able to supply the ATO with answers if they knock on your door?
83. Would you know the break up of a tax invoice?
84. Do you know why you would break up the tax invoice?
85. Would you know how to keep your records so that when tax time comes around your accountant understands it?
86. Do you know how to reconcile your bookwork at the end of each year? BECAUSE THE TAX MAN WILL.
87. Do you know how to read a BAS?