Pre-buying inputs? Save at tax time with AgExpert Accounting

Published February 8, 2021

Can you buy the crop inputs you need and pay less tax? It’s possible. And AgExpert Accounting can help.

In a previous blog, we highlighted the differences between the two reporting methods used in Accounting – cash and accrual. The Canada Revenue Agency lets you choose the cash method when producing tax returns, whereas the accrual method is mainly used for management purposes. You can benefit from this setup in many ways, such as deferring your sales, holding your inventory or pre-buying your crop inputs.

Record your input purchase for maximum benefit

If you know that buying your inputs early can serve as a tax strategy, you’ve likely already ordered and acquired inputs for the upcoming crop season. Let’s see how to record those inputs using AgExpert Accounting.

Record your input purchase on credit

When you buy inputs on credit and record the purchase as a payable charge, the expense is accounted for in the year that the inputs are received. This also reduces your taxable income for the year.

Record the payments for your purchases in the following year

In the example used above, we assumed the first payment will be made on February 15 for $1,500 and the balance due by March 15, 2021, as per the input contract. The payments will be recorded as per below.

Record the final payment in March. The payable account will be cleared, indicating that the customer has been paid in full.

 

Taxes are just the start. Learn more about how AgExpert Accounting can help improve your financial picture. Call our Customer Care team at 1-800-667-7893 or visit AgExpert.ca/Accounting.