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How to handle the penny phase out in QuickBooks

What is happening?

In the Economic Action Plan 2012, the Government announced it would phase out the penny from Canada’s coinage system. 

Important Date:
To help consumers, businesses, charities and financial institutions to plan, a transition date of February 4, 2013 has been set after which the Royal Canadian Mint will no longer distribute pennies.
On this date, businesses will be encouraged to begin rounding cash transactions. For more information on this change, visit the Department of Finance Canada's website.
 
Important Information:
The cent will remain Canada’s smallest unit for pricing goods and services. This will have no impact on payments made by cheque or electronic transactionsonly cash transactions will be affected.  Moreover, pennies can still be used in cash transactions indefinitely with businesses that choose to accept them.
 
Rounding Guidelines:
 
Amount Round Down Amount Round Up 
$1.01 or $1.02 $ 1.00   $1.03 or $1.05 $1.05 
$1.06 or $1.07 $ 1.05   $1.08 or 1.09 $1.10 
 
When to Round

 Again, only cash transactions require rounding. Cheques and transactions using electronic payments—debit, credit and payments cards—do not need to be rounded, because they can be settled electronically to the exact amount.

For any cash payment, only the final amount (or equivalently, the change owed) should be subject to rounding. Individual items, as well as any duties, fees or taxes, should be tabulated in their exact amount prior to rounding, as illustrated: 

 


Amount

Paying Debit or Credit Paying Cash
  No Rounding:
 Final Payment =
Must be Rounded:
 Final Payment =
Lunch = $4.92 $4.92 $4.90

 

Handling Penny Rounding in QuickBooks

Create an Expense or Income Account called Penny Rounding - it really does not matter which as long as this account is of an Income or Expense type.

Receive payments for Invoices and Sales Receipts for the exact amount you originally created them for.  Do not round them up or down this will be handled when making deposits.

When you make your cash deposit look at the final total amount to determine how much it needs to be rounded up or down to equal the amount of your actualy cash deposit.  You should NEVER have to round it up or down more than $0.02 either way. Once you know how much then add a line item to your deposit using only the From Account, Memo and Amount Fields.

  • Received From field should remain blank.
  • From Account  should be your Penny Rounding Income or Expense account
  • Memo can read something like " Penny Rounding amount added to deposit."
  • Amount should be the amount by which you need to increase or decrease the total deposit to equal your physical deposit. 
    • This amount should usually range from $-0.02 to $+0.02 ONLY.
  • Verify the deposit total is a round number
  • Save & Close the deposit.

EXAMPLE:

If a Sales Receipt Total is $23.33 then save and close it as $23.33 even though you will charge the customer $23.35  (+ $0.02)

If an Invoice is $45.06 then receive a payment for $45.06 even though your customer will actually pay you $45.05 because you have had to round down.  (- $0.01)

You will have received an amount from your customers equal to $ 23.35+45.05 = $68.40

In the Deposit window you will see a total deposit of $23.33+$45.06 = $68.39

You then make a line adjustment as described above with an amount = to +$0.01 to bring the total deposit to $68.40 




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