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Hi,
How do I account for the 50% non-deductible expenses on Meals in my accounting software and in T2?
Is it considered "loss" in equity?
Consider the following example:
While closing the year we notice:
Gross taxable income: 50,000$
Reimbursement for employees on Meal Expenses: 2000$, of which:
- 1000$ is deductible
- 1000$ is non-deductible (but was still paid to employees)
To Determine the Net Taxable Income, we:
- Subtract the total deductible expenses (1000$) from the gross taxable income.
So we get 49,000$.
So far so good.
But what about the outstanding non-deductible portion?
It's an expense, but not a deductible one.
So is this considered to be a loss in Equity?
So that I adjust it in the end of the year - and report it in the Balance Sheet Under "Retained Earnings Information"?
e.g.
3740 other items affecting Retained Earnings
?
If not, what's the alternative?
thanks for your help!
Do not subtract the non-deductible portion of meals and entertainment expenses from the company's income. Furthermore, when completing the GIFI schedules report the entire amount of the meals and entertainment expenses for the year. Then complete Schedule 1, Calculation of Net Income for Tax Purposes. On Schedule 1, add-back the non-deductible portion of meals and entertainment expenses to arrive at the Net Income for Tax Purposes.