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Anonymous

Hi,
How do I account for the 50% non-deductible expenses on Meals in my accounting software and in T2?
Is it considered “loss” in equity?

Consider the following example:
While closing the year we notice:
Gross taxable income: 50,000$
Reimbursement for employees on Meal Expenses: 2000$, of which:
– 1000$ is deductible
– 1000$ is non-deductible (but was still paid to employees)

To Determine the Net Taxable Income, we:
– Subtract the total deductible expenses (1000$) from the gross taxable income.
So we get 49,000$.
So far so good.

But what about the outstanding non-deductible portion?
It’s an expense, but not a deductible one.
So is this considered to be a loss in Equity?
So that I adjust it in the end of the year – and report it in the Balance Sheet Under “Retained Earnings Information”?
e.g.
3740 other items affecting Retained Earnings
?

If not, what’s the alternative?

thanks for your help!