Our company in Canada received a cheque from CRA for unused credit on the statement of account for current source deductions. The credit is due to excessive remittance from a previous year. This credit was not included on the balance sheet before. How should it be accounted for on the income statement (if applicable) and balance sheet? This shouldn't be considered a taxable income, presumably.
On the balance sheet, because cash is up, assets are up, so either liability or equity has to be increased. How should this be done?
For reference, here are schedule 100 and 125:
http://www.cra-arc.gc.ca/E/pbg/tf/t2sch ... 00-06e.pdf
http://www.cra-arc.gc.ca/E/pbg/tf/t2sch ... 25-06e.pdf
how to classify return of credit from the government
Moderator: Mark T Serbinski CA CPA
Thank you for the reply. Mm, I only have the records since 2005. The credit first appeared on a statement of account in 2006 when CRA sent this notice: "We have transferred a credit of $x to your account. Please reduce your next remittance accordingly. The credit $x was a result of a T4 slip being amended for the 2002 tax year, and the credit that resulted was then transferred to 2005."
I just assumed it means excessive remittance from 2002 but am not sure what the amendment was exactly. The credit wasn't used up because the company has had no tax payable. The credit was returned in 2007 by request.
Based on this can we imply what the 2002 entry should have been in order to reverse it? If not is there a safe way to handle this, say decrease the wages expensed, or add it to revenue?
I just assumed it means excessive remittance from 2002 but am not sure what the amendment was exactly. The credit wasn't used up because the company has had no tax payable. The credit was returned in 2007 by request.
Based on this can we imply what the 2002 entry should have been in order to reverse it? If not is there a safe way to handle this, say decrease the wages expensed, or add it to revenue?