Need some help with Canadian corporate tax question, Canada,

If your corporation had sales of $1,000, expenses of $500, and received a tax refund of $2,000, then the net income for the tax year would be $2,500 ($1,000 in sales - $500 in expenses + $2,000 in tax refund).

Since your corporation has a positive net income, you would report the tax refund as "other income" on Schedule 1 - Net Income (Loss) for Income Tax Purposes.

To enter the tax refund on Schedule 1, you should complete the following steps:

Complete lines 100 to 500 as applicable based on your corporation's income, deductions, and credits.

Enter the tax refund amount of $2,000 on line 997 - Other income.

Calculate the subtotal on line 500 and enter it on line 510.

Complete lines 600 to 740 as applicable based on your corporation's income, deductions, and credits.

Calculate the net income on line 740 and transfer it to line 300 of your corporation's T2 tax return.

If expenses were incurred for the business but paid for by one of the shareholders and not yet reimbursed to the shareholder in 2021, the corporation would owe the shareholder for these expenses.

As a result, the amount owed to the shareholder would be recorded as a liability on the corporation's balance sheet as of the end of the tax year (December 31, 2021). The liability should be reported as a payable to the shareholder, and the amount owed should be disclosed in the notes to the financial statements.

To record the liability in the corporation's books, you would debit the expense account and credit the liability account.

When the corporation reimburses the shareholder for the expenses, you would debit the liability account and credit the cash account.

If expenses incurred were paid without HST, then they should be recorded without HST. This means that the full amount of the expense, including the HST, should not be entered as the expense.

However, if the expenses incurred were paid with HST, then the full amount of the expense, including the HST, should be entered as the expense.

The HST portion of the expense would then be eligible for input tax credits (ITCs), which can be claimed by the corporation on its HST return.

It's important to keep accurate records of expenses and HST paid to ensure that the correct amount of expenses and ITCs are claimed on the corporation's tax returns.

If you're unsure whether an expense includes HST, you may want to check the invoice or receipt to verify the amount paid.

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