In doing our first corporate year end for a limited company our accountant has informed us that things that we THOUGHT were write-offs for the company are in fact, not. The biggest question I have is this - we had a truck financed through the company that we paid off after about 9 months. It cost us over $50,000 to pay it off. Our accountant now tells us that this in fact is not a write off for the company, only the ammortization on the vehicle is. So by this logic, this also means that the payments we still have on two other vehicles are also not write-offs. I guess my question is, is this true? Is it true that we have shelled out tens of thousands of dollars only to find out that this does not help us in the slightest in regards to our corporate year end? And if this is true, WHY does it not help us? There have been a few things happen while doing our year end that have made me wary of our accountant (basically, screw-ups that I have caught, and I am neither a bookeeper nor an accountant, and I'm paying HER to know this stuff) so now I'm second guessing everything she has said to us. I feel like she doesn't actually understand a lot of this stuff herself, and I am meeting with her tomorrow afternoon and would like to be able to feel comfortable with signing off on this stuff. However until I get comfirmation from another source that the information she has given me is true, I don't feel comfortable doing so. Any help you could give me would be much appreciated, and thank you in advance!

CaptainForest

First, unless you are getting her at a huge discount compared to other accountants, I would suggest you find a new accountant. It is obviously you are not comfortable with her.

Second, something might be deductible under GAAP but not in accordance with Canadian Tax Laws. For example, Inventory. LIFO is acceptable under GAAP but the CRA refuses to accept LIFO as a method for inventory.

As for your truck problem. From my understanding you bought the truck let’s say 7 months ago for 55,000. But you took out some financing on the vehicle. Now you have paid 50,000 to end the liability and now own the truck 100% free and clear? And you want to know if you can deduct that 50,000 as an expense?

Hopefully I understood your problem correctly.

Assuming I did, you cant deduct it.

Think about it like this. Forget about the financing for a second.

Let’s say you see a truck at a dealership for 30,000. You then give the man 30,000 in cash from your bank account.

The Journal Entry is:
Dr. Truck 30,000
Cr. Cash 30,000

While you have paid 30,000 for the truck, you can’t deduct it all at once. You have to amortize it over x amount of years.

So this year you will deduct only a portion of that 30,000 from your taxes.