Hi Mi Ling Yiu,

You seem to be on the right track as long as you originally booked the debit on the 5680 income tax expense account. I would advise to verify with an accountant on this transaction before filing your taxes. This document is handy in handling debits and credits. Hope this helps.

If I made the wrong entry to cr. Income tax payable instead of Income tax expense and already closed my year end to file T2. Now it has a credit balance in the Income Tax Payable in my Balance Sheet. What can I do now since I already closed the year end? Please advise.

Sage 50 will allow you to work in 2 years (current year and previous) at a time. You are able to look up that transaction from the previous year and adjust it and repost the corrections.

Can you give me more details  how to do this? You meant after correction the Balance sheet from previous year will show .00 income tax payable then I can submit T2 

What are the steps to do this adjustment? I still not sure how to do this please give examples.

To adjust Income Tax refund wrong entry

I go to general journal back dated to Oct 18, 2021 and make the adjustment by dr. 2160 Income tax payable  cr.5680 Income tax expenses then click process.

It has this warning "the date for this transaction precedes the Fiscal Start date and will affect prior-year reports. It will also affect the current year's starting balances. Are you sure you want to continue?" 

Should I click this process? Please advise.

Correct. Click yes to continue as long as you did not file 2021 yet.

Method 1

 I back dated to Oct 18, 2021 the actual entry is dr. bank acct. cr Income Tax payable. Then I change to dr. bank acct. and cr. Income tax expenses.

Method 2

Can I go to General Journal back dated July 31, 2022 (year end) make the adjusted

entry  dr. Income tax payable cr. Income tax expenses. and it has this warning

"The date for this transaction precedes the Fiscal Start date and will affect prior year reports. It will also affect the current year's starting balances. Are you sure you want to continue?'

So you think it will not affect the current year's starting balances since is just adjustment with the same amount/figure just put in different entry 5680 instead of 2160  I am scare to click the process so I afraid it will affect the starting balance. Please advise.

The current earnings for the current year always gets pushed to retained earnings when you advance into the next year. This is why you are getting the message. It is not a big deal in my opinion because you have not filed anything from the sounds of it. Continue posting the transaction on the date that it belongs and you should be fine. Run the adjustment by an accountant before filing the T2 to make sure you did the right thing.

I am more comfortable using Method 2 by back dated to July 31, 2022 (year end)make adjustment there. Is it also ok too. Please advise.Thanks so much

I have no accountant.

You must post the transaction on the date of the bank deposit otherwise your bank reconciliation will not balance.

On October 18, 2021 when received CRA refund I debited bank account cr. Income Tax payable and on July 31, 2022 I debit Income Tax Payable and credit Income Tax expenses. But now there is a negative amount in my Income statement under Expenses. Is this ok. Please advise.

on October 18, 2021 when received refund from CRA

I dr. 1060 bank account and cr. 2160 Income Tax payable.

To do the adjustment

 I back dated July 31, 2022 dr. Income Tax payable cr 3560 retained earnings.

Please advise

P.S.

The Income Tax refund cheque received from CRA was on Oct. 2021 but

the refunds applied to 2020 and 2018 respectively.

Do I have to go back to adjust year end if 2020 and 2018?

Please advise.

I have no accountant.

Dr. Income Tax payable cr. retained earnings

Hi Mi Ling Yiu,

Like Alwyn had mentioned in the other post, we highly recommend you speak to a trusted CPA to ensure that you are doing the correct entries and filing. Accounting can be much like an engine not running properly and we need to do a diagnosis on the past history to determine a current fix and we cannot give a single answer based on one scenario. Here are the facts that we do know in your situation:

1. You must post a debit to the bank account around the time the deposit was done and the transaction must match that time period. If the deposit occurred in 2021, keep the transaction in this period otherwise, the bank reconciliation will not match.
2. Sage 50 will not allow you to post to 2020 or 2018 and you should not need to do this anyway otherwise you would be ruining the tax filing. Liability accounts accrue their balance year over year and this is the reason why you may not need to go back to 2018 or 2020 to make any changes.
3. You may not need to post directly to the retained earnings account because posting to the expense account is directly related to current earnings and eventually retained earnings. A negative expense sounds good but only if you already booked the expense in the past. If you are offsetting past year expenses, a negative expense is good because the account was a positive in the past (if that is the case).
4. You need to have someone look at the full history of the General Ledger to see the full picture.

Given what you have told us, we suggest you take these findings to an expert in an effort to avoid tax filing issues that can cause headaches down the road. Trust that this direction suits you well.

Hi Mi Ling Yiu,

Like Alwyn had mentioned in the other post, we highly recommend you speak to a trusted CPA to ensure that you are doing the correct entries and filing. Accounting can be much like an engine not running properly and we need to do a diagnosis on the past history to determine a current fix and we cannot give a single answer based on one scenario. Here are the facts that we do know in your situation:

1. You must post a debit to the bank account around the time the deposit was done and the transaction must match that time period. If the deposit occurred in 2021, keep the transaction in this period otherwise, the bank reconciliation will not match.
2. Sage 50 will not allow you to post to 2020 or 2018 and you should not need to do this anyway otherwise you would be ruining the tax filing. Liability accounts accrue their balance year over year and this is the reason why you may not need to go back to 2018 or 2020 to make any changes.
3. You may not need to post directly to the retained earnings account because posting to the expense account is directly related to current earnings and eventually retained earnings. A negative expense sounds good but only if you already booked the expense in the past. If you are offsetting past year expenses, a negative expense is good because the account was a positive in the past (if that is the case).
4. You need to have someone look at the full history of the General Ledger to see the full picture.

Given what you have told us, we suggest you take these findings to an expert in an effort to avoid tax filing issues that can cause headaches down the road. Trust that this direction suits you well.

Thanks so much for your advice.

So the expenses in the Income statement will also has a negative amount for next year. How do I clear this negative amount in the future? Please advise.

When you start the new year, the amount will roll into Retained Earnings automatically.

Thanks so much for your explanation.

I have another question:

How do you synchronize if Parts inventory in the Balance Sheet is not the same as in the Inventory Summary report

This article may help you with this. If this does not solve your issue and you do have a valid support plan, you may call 1-888-522-2722 for further investigation. Best regards.

Thanks DeneshS for your advice.