Management Bonus/Salary

Hello Experts,

I have a small business and have a Liability account Due to Shareholder.

When I did my Income Tax recently, in order to offset my Business Income my accountant took money from my business and put it as personal income, which I understand.

In order to reflect this in my QuickBooks I thought to Debit my Salary Expense account and Credit my Due to Shareholder, but my accountant said not to go through my Due to Shareholder. How else can I do it?

Any help will be appreciated.
APD TorontoSoftware DeveloperAsked:
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JohnBusiness Consultant (Owner)Commented:
You may not have met the rules around salary and bonus. Where I am (GTA if you are), bonus declared last year was payable by this past June. Missing the target means moving the income to you from last year to this year.

1. Ask your accountant about this.
2. Ask your accountant for the adjusting entries.
APD TorontoSoftware DeveloperAuthor Commented:
Thanks John,

I am also in GTA. Do you know if my Due to Shareholder Liability account is a big negative number and keep getting bigger, do you know if it can potentially cause problems with CRA? My accountant said no, but...
JohnBusiness Consultant (Owner)Commented:
Your Due to Shareholder account should clear out when paid. You should not allow it to just increase. The reason, as noted, is that bonuses must be paid out by June of the next year.

Having a liability won't cause problems for accounting, but it is a tax law issue that you need to take into consideration.

I would speak again with your accountant but he / she should be familiar with this.

I declared a bonus one year recently and my accountant (who had prepared the return) called me in May to ensure I remembered to pay out the bonus.

Also Due to Shareholder can come from loans from you to the company, but I assumed we were not talking about that.
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APD TorontoSoftware DeveloperAuthor Commented:
I never get a clear answer from my accountant, but I will try again.

I have Due to Shareholders as a Loan, as you said. When I take money out, I decrease it and when I buy something from personal money for the business, I increase.

My Due to Shareholder was -$30K, and if I put my bonus through it, it will be -$45, next year it will increase more and more...Does that sound right?
JohnBusiness Consultant (Owner)Commented:
Yes, when you put through your bonus the Due to account increases. But it should decrease when you pay the bonus and that needs to occur by June of the next year.

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APD TorontoSoftware DeveloperAuthor Commented:
Sorry, I got little sidetracked.  I got my credits/debits mixed, but all is wel now.

Thanks!
JohnBusiness Consultant (Owner)Commented:
@ADP_Toronto, you are very welcome and I was happy to help. Year-end coming up for my tiny consulting company.
APD TorontoSoftware DeveloperAuthor Commented:
what type of consulting?
JohnBusiness Consultant (Owner)Commented:
I used to do Technology Consulting, now I do Accounting Consulting. I do all this in the City of Toronto. You can go to my profile here and look in my Biography as I detailed it there
APD TorontoSoftware DeveloperAuthor Commented:
If you need any software/websites/small networking please keep me in mind.

Thanks for your help again.
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