You have a lot going on here, so I want to start with some basic terminology so I understand what you mean.  I personally hate using terms like "Someone sent me a credit note or debit note" because I have no idea which perspective this is.

So, in English, I like to say, "we and the CRA have agreed that we have overpaid our corporate taxes" instead of "We have a credit at the CRA of $44,000."

If I am correct in this statement and that they are equivalent, then the issue is likely with the original entry showing this on your books.  When you look at the balance of a liability account (which I assume you mean when you say "the credit side of the chart of accounts", a positive balance means you owe someone money, a negative balance means you have overpaid.

From what you have said, the overpayment amount was posted to your books as a positive balance incorrectly.

The rest of the entries, assuming your corporate tax payable account is a negative, I believe are correct.  You are reducing what you owe in payroll deductions and using the money on account with the CRA as the payment method.  Therefore the remaining amount overpaid in corporate tax is being used up ie. moving towards a zero balance.

I do have a problem with your Oct payment.  If it was paid by money in your bank account, then should you really reverse that when it really happened?  How are your going to reconcile the bank account if your statements shows the money going out but not coming back in.  You need to confirm with the CRA that the payment for Oct was from your account or the Corporate Tax account before you leave that entry.  If the Payroll department at the CRA received that payment and applied it against your Oct remittance, then your books are now inaccurate.

Hi Richard,

Thank you for your response. I checked the original entry pertaining to the overpayment to CRA.

The bookkeeper Credited Corporate Tax Payable and Debited Corporate Tax Expense.

The Description indicated it was an "adjusting year end entry as per accountant"

So if I understand you correctly, if we overpaid the CRA, the journal entry should have been a Debit to Corporate Tax Payable and Credit to Corporate Tax Expense correct?

Regarding the October entry. I checked the bank statement and no payment came out of the bank to the CRA. Perhaps this was marked as paid from the bank, knowing it would be reversed right after? The other bookkeeper took care of this, so I'm uncertain what her thought process was.

In any case, we want to be able to open our Receiver General account and see that source deductions were paid each month. Is there another way we can record the 2 months we used the credit other than paying the invoice from the bank and doing an adjusting entry after?

I can't tell you what the entry should have been.  I would pull the year end adjusting entries the accountant provided and make sure the entry was recorded properly (get it from the accountant again if you can't find the file).  If it was posted correctly, then likely there is a problem with the actual payment entry for the corporate taxes because the CRA thinks you paid more than what was owing.  This should have shown up in the bank at some point and if not, someone needs to trace how the CRA got extra money from the company if it was not cut from the business bank account.

alg1 said:

Perhaps this was marked as paid from the bank, knowing it would be reversed right after?

Why would anyone post an entry to the bank knowing it was going to be reversed?  That doesn't make sense to me.  Just don't make the entry if the money is not really going to be taken out.

I am assuming by "our Receiver General account" you mean the Aged report on the Vendor called Receiver General Payroll.  There are several ways to handle this.  The easiest way is to post an entry on the last line of the purchase invoice as a negative for the amount to be applied to the credit against the Corporate tax payable account.  The problem with this type of entry is that your Vendor Aged Detail report will show a zero balance for that invoice and will not show a payment entry (because it is a zero balance).

A more explicit method is to post the payment against the Undeposited funds account (assuming you have one) and then post a General Journal entry to move it to the Corporate Tax Payable account on the same date so the balance of the account goes to zero (or back to it's original balance) on the same day.

A more complicated method would be to set up a credit card to be payment from the Corporate Tax Payable account but I wouldn't do this if you don't expect it to happen a lot going forward.

Hi Richard,

After speaking with the bookkeeper who posted the entry for the over payment of Corporate Taxes, it looks like our accountant is going to have to take a further look. 

Thank you so much for your help and feedback. I wouldn't have known there was an error otherwise. Much appreciated!

Hi Richard,

After speaking with the bookkeeper who posted the entry for the over payment of Corporate Taxes, it looks like our accountant is going to have to take a further look. 

Thank you so much for your help and feedback. I wouldn't have known there was an error otherwise. Much appreciated!