Q: How do I enter Canadian Payroll Deductions in Clarity Accounting?

Currently, our accounting software does not include Canadian Payroll Tables.  However, we provide a cost effective solution for small businesses to keep track of payroll expenses and deductions by allowing you to add payroll deductions as expenses or adjustments.  If you are new to running a small business, you will need to do some research on Canadian Payroll from the CRA website and how to electronically remit taxes to the CRA.

If you operate a business in the USA, please refer to our help file Entering Payroll Deductions - USA.

One great thing about the CRA is that they have a tool called the Payroll Deductions Online Calculator available for small business owners to get all the payroll deductions calculated online without having to do the work manually themselves.  If you select the “Determine Gross Income” option and enter the gross salary of your employee in a given pay period (i.e. $1000 bi-weekly), then the payroll deductions online calculator generates a very nice printable table giving you a net pay amount with all the deductions included.

Instructions for Entering Canadian Payroll Deductions in Clarity Accounting

1. Create payroll and expense accounts by going to the “Accounts” under the “Setup” section on your left navigation
   
2. Scroll down to the liabilities section.
   
3. Create your payroll deduction accounts by typing in the name and the description of the deduction.  Also use select “Taxes and Remittances” as the type of Long term liability account you are creating.
   
4. For Canadian payroll deductions, you will need to calculate and remit “federal tax deductions”, “provincial tax deductions”, “CPP deductions”, and “EI deductions”.  There may be other applicable deductions you would like to track such as “requested additional tax deductions” or “other amounts deducted at source”.  You may also use this section for to record other liabilities such as union dues and vacation pay.  Please ensure you click the “Add Account” link to add each account.
5. While still in the “Accounts” setup page, go under “Expenses” and add an Expense Account called “Employee Salaries”.
   
6. To enter these payroll deductions, go to the “Expense” section and enter the relevant data.
   
7. For the purpose of this help file, we would assume that Employee A has made $1000 (Gross Pay) in this pay period, please refer to the screen shot below:
   
   Please enter deductions as a negative number (i.e. $-79.72)
8. Note, to get the Tax and Remittances Accounts to show up under the “Expense Account” drop down, you will have to scroll down to the bottom and click “Show All Accounts” or simply type the account name into the text box (we have a search function that will allow you to find the accounts quickly).
   
9. After you click “Add” to add the payroll deduction expenses, you can click on “Edit” to view the summary of this transaction or click “Repeat” to repeat this transaction.  The “Repeat” function is great because you can enter multiple payroll entries in a row by simply changing the employee’s name “Vendor” and the deductions amounts.
   
10. You will be able to view deductions and pay history of your employees under the “Vendors” section.
    
11. You can also view total payroll deductions in the Balance Sheet section.
    
    
12. If you are an employer who is matching CPP contributions, you will have to create an expense account called “Matching CPP” and enter a separate expense transaction for your own records.  This is independent of the payroll entries and you would remit this amount to the CRA.

If manually submitting payroll remittances is something you would like to do for your small business, you can easily keep track of all your remittances and expenses inside Clarity Accounting.  You can try a 30 day free trial of Clarity Accounting with no obligations necessary to see how easy small business accounting can be.  After all, Clarity Accounting is created by Canadians with all the sales taxes like GST, HST, PST, and QST functions included.

Q: Can I run more than one business (multiple files) with Clarity Accounting?

One unique feature of our online accounting software is that each user has the ability to manage multiple business files.

Step by Step Instructions

1. Sign in to Clarity Accounting with your user name and password
2. On the top left hand corner of the Dashboard, find the drop down menu with your business name under the “Navigation” title
   
3. Click on the drop down — this will show you all the business files you currently have access to
4. Click on the link that says “New Business…”
5. Follow the same procedures as you did when you set up your first business file
6. In the future, you will be able to use the same drop down menu to access all the business files you are managing as well as adding new business files.

Removing a Business File

1. Sign in to Clarity Accounting
2. Using the drop down under “Navigation”, select the business you wish to remove
3. Go to the “Business Profile” section under Setup
   
4. Scroll down to the bottom of the page
   
5. Click on the “Remove” button

Multi-User Access

Oftentimes, the desire to set up multiple business files is associated with the need to give access to multiple users to collaborate on business files.  If this applies to you, please refer to our help file on Adding Multiple Users to Your Business.

“Transfers” as an accounting term refers to the transfer of funds from one account to another.  In the modern world we live in today, it is hard to imagine life without money transfers between different bank accounts.  The most obvious example is paying your credit card bill through online banking.  Normally you would go to a bill payment page and select the amount you would like to pay / transfer from your checking / savings account to your credit card.

Transfers are used within an accounting software for very similar reasons.  For example, many businesses use their business credit card to purchase equipment so that they can keep track of business related expenses.  While this is occurring, the accounting system retains a balance in the credit card account.  If a transfer was not added in the accounting system from the checking account to the credit card account, it would seem like you are incurring a lot of unpaid credit card debt.

Entering Transfers in Clarity Accounting

Case Study: Clarity Accounting owed $1000 on its business visa card.  When the visa bill came at the end of the month, Clarity Accounting paid the visa bill out of the Business Checking account.

Using Transfers for Currency Exchange

One of the features of Clarity Accounting is the robust multi-currency support it has for small businesses and professionals who do business internationally.  We are already seeing many clients living in places such as Thailand and Japan while doing business over the Internet with companies in North America and Europe.

This help file is designed to provide instructions on how to utilize the multi-currency feature inside our accounting software.

Entering Multi-Currency Expenses / Bills

Case Study

For the purpose of this example, Clarity Accounting is a US based business with US dollar as its primary currency.

Clarity Accounting has contracted Habitsoft - a Canadian graphic design firm to upgrade the look of its website.  Habitsoft, Inc has done 60 hours of work at $100 CDN / hour for a total invoiced amount of $6000 CDN.  Since Habitsoft, Inc is a Canadian company, they are requesting to be paid in Canadian dollars.  An invoice was sent to Clarity Accounting on October 1, 2008 from Habitsoft, Inc with a 30 day term (payment to be received within 30 days).

1. To enter expenses or bills in another currency, sign in to your Clarity Accounting Dashboard and click on the “Enter Bill” tab under the Expense section.
   
2. By entering a bill with its exchange rate on the date you have received the invoice, an account payable has been created and will be tracked within the accounting software.
3. On October 30, 2008, Clarity Accounting decided to proceed with payment to Habitsoft for $6000 CDN.
   This couldn’t have been a better time for Clarity Accounting to pay Habitsoft because in the 30 days from October 1, 2008 to October 30, 2008, the Canadian dollar had suffered an unprecedented drop in value against the US greenback.
4. Please ensure that when you are paying a bill in a currency other than your primary currency, you will need to select the “Vendor” name as well as “Currency” of the original invoice in order for outstanding payments to appear on the “Pay Bill” page.
5. The reason why it is so important to enter the correct exchange rates when entering a bill and when entering a bill payment is that our accounting software will automatically calculate the “Gain or Loss on Exchange” for you - which is something you can use to file your taxes at the end of the year.
6. To view the Gain / Loss on Exchange, you will have to go to the “Profit and Loss” link under the “Reports” section on your left navigation bar.
7. You can see the precise details of the “Gain / Loss on Exchange” by clicking on the link in the Profit and Loss section:

As you can see in this example, by paying Habitsoft 30 days later in a turbulent economic month, Clarity Accounting made $742.35 of gain on exchange!!

Entering Multi-Currency Income

This feature is used when receiving income or sending invoices in a different currency other than the default currency.

1. To get to the multi-currency function of the Income section, please ensure you select the “Enter Invoice” option.  See below:

   

2. When entering the payment, please use the “Enter Payment” tab and select the “Customer” and the “Currency” of the original invoice.
   

Similar to the enter multi-currency expenses and bills instructions listed above, the “Gain / Loss on Exchange” can be viewed in the “Profit and Loss” section.

This feature has recently been made available to our accounting software due to client request.  The instructions are listed below:

1. Log in to your Clarity Accounting Dashboard.
2. Under “Reports” click on “Profit and Loss”.
   
3. At the top of the Profit and Loss page, choose a date range.  for example “as of” October 1, 2008 “until” October 31, 2008.
   
4. Choose a report “by” Item, this can also be done by accounts, vendors / customers, and sales taxes.
   
5. You can also choose to further customize this report by Income or Expenses under the “focus” area
   Leave this field blank if you would like a report with both income and expense categories.
   
6. You should get a breakdown of your items by quantity and amount.

The purpose of this help file is to provide instructions on how to enter bills (tracking aged payable) and bill payments.

The reason why a business would want to track their bills (or aged payable) may be a matter of cash flow.  The key in maintaining good cash flow is to get paid as soon as possible and pay the bills as late as possible.  Often times when a business receives an invoice from another business, it becomes a bill.

Clarity Accounting Enter Bill View

Required data entry fields

Date: When did you receive the invoice / bill?
Vendor: Who sent you the invoice / bill?
Invoice #: What was the invoice number on the invoice you have received?
Terms or Payment Account: Is there a payment due date on the bill / invoice (an unpaid bill)? Is this a bill that is coming out of your Visa or Bank Account (a bill that has already been paid)?
Once you have selected a terms of payment, the due date will be automatically entered for you.
Expense Account: Every expense / bill is associated with an expense account / category for tax deduction purposes.
Description: This is an optional field for you to enter the description of the bill / expense.
Price: How much is the bill?
Sales Tax: Did the bill come with sales taxes included?
Currency: If you are receiving an invoice from other countries or if you are expected to pay in other currencies, you can use this tab to enter multi-currency transactions.

Case Study

ABC company is based in the US.  It hired Habitsoft, Inc to do some custom development work for them.  Habitsoft billed ABC company for 40 hours of work at $100 / hour.  The invoice date is October 21, 2008 and the terms of the invoice is for the invoice to be paid in full within 30 days (term 30).  Since Habitsoft is a Canadian company, they would like to be paid in Canadian dollars.

As you can see from the sample data entry fields above, by filling in the exchange rate, our online accounting software automatically does the calculation that shows the total bill amount to be $4000 CDN — which works out to be $3200 USD on October 21, 2008.  You can get daily updated currency exchange rates on XE.com.

Recording Bill Payments

Once a bill has been paid, then you can go into the “Pay Bill” tab to enter a bill payment.  Alternatively, you can also find this bill in your list of bills/ expenses and enter a bill payment through the summary page.

Using the same case study we have been using in this help file, we will record a payment for Habitsoft Inc.

Please note: It is important for you to select the Vendor and the correct “currency” in order for an outstanding invoice to show up on the “pay bill” section.

When you record a bill payment, please enter the date you paid the bill and which bank / credit card account it is coming out of.  In this case, Habitsoft, Inc was paid $4000 CDN on October 23, 2008 with Paypal.

More Questions?

If you have any questions regarding how to enter bill and bill payment records, please do not hesitate to contact us.

Clarity Accounting Enter Income View

Online Accounting Software | Enter Income

This is the enter income view users will see as soon as they sign in and enter the “Dashboard” area.

It is split into 4 sections using horizontal tabs:

• Enter Income
• Enter Invoice
• Enter Payment
• Detailed

Users of our online accounting software can also use the Income link on the left navigation to go to an income specific data entry page showing all entries as data is being entered.

Using the “Enter Income” Tab

This section is mainly used for the purpose of entering income that has already been paid.  Examples of this type of income are:

• commission income from sales
• products and services paid by cash, credit card, or direct bank transfers

Components of an Income Record

• Date
• Customer
• Invoice / record #
• Payment Account
• Income Account
• Description
• Quantity
• Price
• Applicable Sales Tax

Terms & Payment Accounts

There are 2 ways income records can be recorded.  They can be recorded as “Paid” or “Unpaid”.

Paid income records generally refer to products and services that are paid immediately with cash, credit card, or direct deposit.

Unpaid income records are generally used for invoicing.  In an accrual / double ledger accounting system, when you invoice a client for your products or services, you are considered to have “earned” that income regardless of whether or not you are paid.  Invoices usually have a “payment term” associated with it, allowing customers to pay days after the initial invoice was sent.  Outstanding invoices are referred to as “Aged Receivables” in accounting terms.  Unpaid income records will also require small businesses to track down payments and entering payments into the accounting software when payments are received.  If for some unfortunate reason, an invoice was not paid, then it can be written off as “bad debt”.

To record income that is “Paid”, select the account into which the money was (or will be) deposited. For example, if you receive a cheque and deposit it into your checking account, you would select “Checking Account”.

Income Accounts

Income accounts are used to differentiate revenue from different sources of income that will show up in your profit and loss statement.  This is also a great indicator of which products or services are most profitable to your business.  When you first create a business with Clarity Accounting, you will be asked to fill in your income sources.  However, if you did not list all the income sources at the time you set up your business profile, you can always click on the “New Income Account” to add more income accounts.

For each component of the income, select an income account in order to categorize the income; this allows you to view the income you have earned broken down by account in the Profit & Loss report.

Entering Income Case Study:

Jane is a real estate agent who received $10,000 in commission income from Remax (the real estate agency she represents) on October 3, 2008 for the sale of a piece of property.  She is paid via direct deposit into her checking account.  There are no applicable taxes in this transaction.

Click “Add” after the data has been entered.

Multi-Currency Entries

If your company pays and accepts income in currencies other than your own default currency, please use the “Enter Invoice” tab for multi-currency options.

Available options after clicking “Add”

Edit

The edit option will bring you to a summary of this particular record, allowing you to change anything you need to change.

Repeat

This option allows you to “repeat” this transaction.  Many people use this feature if they are entering an income record with very similar elements such as same customer with the same payment and income accounts.  This allows users to make minor changes with date, description, or price without re-entering all the information.

Download PDF

A PDF of the transaction can be downloaded as an invoice or a receipt (with the balance due marked $0.00) depending on the nature of the transaction.  We allow users to add their own logo on the PDF download.  Please refer to the help file “Uploading logo to Invoices” for detailed instructions.

The purpose of this help file is to show Clarity Accounting users how to enter invoices as well as creating and downloading PDF Invoices.

Invoices can be entered right on the Dashboard or under the “Income” section on the vertical navigation bar.

Clarity Accounting Invoice View

This section is used for small businesses whose primary method of getting paid is through “Invoicing”.  Invoices are generally issued by businesses providing products or services to their clients.  An invoice usually consists of the following elements:

• Invoice Number
• Invoice Date
• Vendor Contact Information
• Client Contact Information
• Payment Terms / Due Date
• Income Account
  
• Quantity (number of items sold / number of hours worked)
• Price / Rate (cost per item / hourly rate)
• Subtotal
• Applicable Taxes
• Balance Due
• Pre-payments (if applicable)

Terms & Payment Accounts

There are 2 ways income records can be recorded.  They can be recorded as “Paid” or “Unpaid”.

Paid income records generally refer to products and services that are paid immediately with cash, credit card, or direct deposit.

Unpaid income records are generally used for invoicing.  In an accrual / double ledger accounting system, when you invoice a client for your products or services, you are considered to have “earned” that income regardless of whether or not you are paid.  Invoices usually have a “payment term” associated with it, allowing customers to pay days after the initial invoice was sent.  Outstanding invoices are referred to as “Aged Receivables” in accounting terms.  Unpaid income records will also require businesses to track down payments and entering payments into the accounting software when payments are received.  If for some unfortunate reason, an invoice was not paid, then it can be an expense written off as “bad debt” .

To enter a “Paid” invoice, select one of the rows with “Paid” in the second column, and the bank, cash, or credit card account into which the payment is deposited.  For example, if you received a cheque and deposited it into the bank, you would select your Checking Account.

To enter an “Unpaid” invoice, select one of the rows with “Unpaid” in the second column, and the number of days the receiver has after the invoice date to pay.  For example, if you receive a bill that has “net 30″ terms (due 30 days after receipt), you would select “30 days”.

Income Accounts

Income accounts are used to differentiate revenue from different sources of income that will show up in your profit and loss statement.  This is also a great indicator of which products or services are most profitable to your business.  When you first create a business with Clarity Accounting, you will be asked to fill in your income sources.  However, if you did not list all the income sources at the time you set up your business profile, you can always click on the “New Income Account” link to add more income accounts.

For each line item on the invoice/income record, select the income account that best matches that item, or add a new one if it doesn’t fit an existing category.

Sample Case Study:

Clarity Accounting recently demonstrated their online accounting software at a very successful Launch Party event put together by Bootup Labs.  They received overwhelming requests from bloggers and freelancers to integrate Clarity Accounting with Freshbooks.  This is because Freshbooks is an awesome online invoicing software and Clarity Accounting is an awesome online accounting software.  Freelancers thought such an integration would allow those who use Freshbooks to generate Balance Sheet and Profit and Loss reports within Clarity Accounting.

Creators of Clarity Accounting took user suggestions seriously and contracted Habitsoft, Inc. to implement the Clarity Accounting - Freshbooks integration.  It took Habitsoft, Inc. 40 hours of work to complete the project and Habitsoft charges an hourly rate of $100 / hour.  Habitsoft sends an invoice to Clarity Accounting with a 30 day term (payment of the invoice is due within 30 days of the date the invoice was created).  There was also a 5% sales tax applicable to this invoice.

This is how the data entry fields look like:

After Habitsoft clicks “Add”, it will be given several options:

Download PDF

Click this link to download a PDF of the invoice.  Users can add their own logo on the PDF invoice.  Please refer to the help file “Uploading logo to Invoices” for instructions on uploading your own logo.

Here is what the PDF invoice for this example looks like:

Please note: Addresses and contact information shown on the invoice will depend on how much information is included when filling out the Business Profile information as well as the Customer information when adding a new customer.  You can edit the customer information by going to the “Customer” link on the Dashboard under “Setup”.

Edit

The edit option will bring you to a summary of this particular record, allowing you to change anything you need to change.

Repeat

This option allows you to “repeat” this transaction.  Many people use this feature if they are entering an income record with very similar elements such as same customer with the same payment and income accounts.  This allows users to make minor changes with date, description, or price without re-entering all the information.

Entering Payments

When Habitsoft receives a payment from Clarity Accounting, it will have to enter the payment into the accounting system with an associated Bank and Income Account.  For detailed information on how to add invoice payments, please refer to the help file “Adding Invoice Payments”.

If you are a small business based in Canada.  We have all the Canadian taxes included in our online accounting software.  Since Clarity Accounting is based in Canada, we understand the complexity of the Canadian tax system.  All you have to do to make sure the tax codes will be automatically included is to make select your country as “Canada” when filling up the information for your Business Profile.

There are two ways to get to the Tax Configuration page:

1. From the “Taxes” link under the “Setup” section on the Dashboard
   
2. From the data entry box under “Sales Tax”
   

Tax Configuration

Many small businesses have to charge GST, HST, PST, and/or QST for goods and services sold.  When the tax settings are properly set up, Clarity Accounting will track the sales taxes payable / receivable for you when you sell goods and services.  For example, GST payable usually refers to the GST you charge your clients and later have to remit back to the government.  GST receivable usually refers to the GST you pay on expenses that you can file for the government to pay you back.

Tax Setup Instructions

1. Click on the check box on the top left hand corner under the “Sales Tax” heading that says:
   “This business pays or collects sales taxes in Canada”
   
   
2. If your business is registered for GST or HST, please click the check box and fill in the necessary information.  Your GST, HST, PST & QST number will show up on the PDF invoices created.
3. Click “Save”
4. When you enter your income or expenses, you should see all the taxes you have selected to be applicable to your business are included in the “Sales Tax” section:
5. Shortcut Keys: If you would like to speed up the data entry process, you are welcome to type in:
   g for “GST”
   p for “PST”
   B for both “GST” and “PST”

What does the “-5% GST” function do?

This function is mostly used when entering expenses.  For example, if you go out for a meal with a prospect that cost you $100 including GST, you would put the price as $100 and the tax as “-5% GST” or simply “-g“.  This just means that the subtotal of your meal actually came out to $95.24, but after adding 5% GST ($4.76), your meal had a total of $100.  This process simply allows our online accounting software to track the amount of “sales taxes” you are paying on expenses without you having to go through the process of doing that calculation yourself.

If you were to have a meal that had a subtotal of $100 and you chose the “5% GST / G” option, the meal would have a total of $105.00 with 5% tax included.

Reports

Reports on taxes payable and receivable can be found at the bottom right hand corner of the “Dashboard” or in the “Balance Sheet” section.

Additional Help

If you require additional help in how to create tax settings for other types of taxes, please contact us for further instructions.

There is a saying that there are two things that are certain in life — death & taxes.  Well the death part is not something we have to deal with imminently, taxes however, can be very real for anyone running a business.

At Clarity Accounting, we have implemented a system that allows people from anywhere around to world to include sales taxes in their income and expense transactions.

If you are a Canadian business, please refer to the following help file “Tax Setup for Canadian Businesses“.

There are two ways to get to the Tax Configuration page:

1. From the “Taxes” link under the “Setup” section on the Dashboard
   
2. From the data entry box under “Sales Tax”
   

Tax Configuration

Many small businesses have to charge sales taxes for goods and services sold.  When the tax settings are properly set up, Clarity Accounting will track the sales taxes for you when you sell goods and services as well as tracking sales taxes you have paid on expenses.

Tax Setup Instructions

1. Click on the check box on the top left hand corner under the “Sales Tax” heading that says:
   “This business pays or collects sales taxes”
   
2. Fill in the appropriate information in the fields provided.  For example:
   
3. Click “Save” to save your tax settings
4. The “Sales Tax” options will now be available for you when entering your income or expense data:
   

What does the “-Sales Tax” function do?

This function is mostly used when entering expenses.  For example, if you go out for a meal with a prospect that cost you $100 including tax, you would put the price as $100 and the tax as “-Sales Tax”.  This just means that the subtotal of your meal actually came out to $95.24, but after adding 5% Sales Tax ($4.76), your meal had a total of $100.  This process simply allows our online accounting software to track the amount of “sales taxes” you are paying on expenses without you having to go through the process of doing that calculation yourself.

If you were to have a meal that had a subtotal of $100 and you chose the “5% Sales Tax” option, the meal would have a total of $105.00 with 5% tax included.

Reports

Reports on taxes payable and receivable can be found at the bottom right hand corner of the “Dashboard” or in the “Balance Sheet” section.

Additional Help

If you require additional help in how to create tax settings for more than one type of tax, please contact us for further instructions.