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Question: Difference between Supplies & Office Expenses?

I’m starting a new section on this blog called “Random Questions“.

Someone commented on my post Setting up your business books: Step 1 – Expenses and it was such a good question that I wanted to dig it up and let it breathe. Feel free to email me or ask questions on posts, and if I know the answer I may elevate it to my “Random Questions” category. If I don’t know the answer, I’ll say “I have no idea” and that question will never see the light of day.

Here we go.

“What’s the difference between Supplies & Office Expenses? And what are “Office SUPPLIES”? I don’t know what envelope to put my printer ink in.”

People get confused by this because many accounting programs have accounts called “Office Supplies” and some have “Office Expenses“. “Office Supplies” does not exist in CRA’s world. They only recognize “Office Expenses” and “Supplies“, so I suggest we seek out all instances of “Office Supplies” in our books and destroy them now. From this point on let them be known as “Office Expenses“.

Here are CRA’s definitions of both of these expense categories (note there is no “office supplies“):

You can deduct the cost of items used indirectly to provide the business’s goods or services, such as drugs and medication used in a veterinary operation, or cleaning supplies used by a plumber.

Office Expenses:
You can deduct the cost of office expenses. These include small items such as:

  • pens
  • pencils
  • paper clips
  • stationery and
  • stamps.

Office expenses do not include items such as:

  • calculators
  • filing cabinets
  • chairs and
  • desks.

These are capital items.”

Now, back to the real world. Here’s what I tell my clients:

“Every business should have Office Expenses, but not every business needs Supplies.

Supplies” are things not associated with a normal office, but you use them in your business. Things like earplugs for a sculptor using power tools, or gloves for a cleaning business. If you only have one or two of these types of things, don’t bother having a “Supplies” expense in your business. Just put them in your “Office Expenses” envelope and never talk about it again. It will all work out in the end.

So where do I put printer ink?

Office Expenses. ‘Nuff said.

July 4, 2011 Posted by | Random Questions | , , , , | 11 Comments