Personal “Profit & Loss Statement” required for mortgage?
"The bank is asking for a P & L because as a contractor you are in essence running your own business.  Its kind of a technicality, all you need to do is look at any expenses that you paid out of pocket while working there that were job or ""business"" related. Write a list of those expenses such as ""Gas"", ""Materials"", ""Legal Expenses"", etc. and then show your total income from that job or ""contract"" subtract the expenses and show your total profit or loss hence Profit / Loss Statement. I realize that you may not have any real expenses tied to that job although I don't know and if you don't, then simply write in your income, say no expenses and show your ""profit/pay"" at the bottom of your P & L! Viola! Your Done! Good luck with the closing!"
"Books would be considered Personal-Use Property according to Canada's income tax laws.  The most detailed IT I was able to find is IT-332R, which says: GAINS AND LOSSES 3. A gain on the disposition of personal-use property is normally a capital gain within the meaning of paragraph 39(1)(a). Where the property is a principal residence, the gain > is computed under paragraph 40(2)(b) or (c). 4. Under subparagraph 40(2)(g)(iii), a loss on a disposition of personal-use property, other than listed personal property, is deemed to be nil. [...] This part of the bulletin indicates that a gain might be considered a capital gain - not income.  However, you don't get to book a loss as a capital loss.  This is the first hint that your book sale - which is actually an exempt capital loss - shouldn't go on your tax return unless it's one of the ""listed"" items: LISTED PERSONAL PROPERTY 7. Listed personal property is defined in paragraph 54(e) to mean personal-use property that is all or any portion of, or any interest in or right to, any (a) print, etching, drawing, painting, sculpture, or other similar work of art, (b) jewellery, (c) rare folio, rare manuscript, or rare book, (d) stamp, or (e) coin. So unless you're selling rare books, the disposition (sale) of them is essentially exempt as income, regardless of whether you sold it at a profit or at a loss.  If it is rare, then you might be able to consider it a capital loss, which doesn't help you much unless you had other capital gains, but you can carry over capital losses to future years. There's also a newer IT related to hobbies and ""collecting"" items, IT-334R2.  This one says: 11. In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit. Where such an expectation does not exist (as is the case with most hobbies), neither amounts received nor expenses incurred are included in the income computation for tax purposes and any excess of expenses over receipts is a personal or living expense, the deduction of which is denied by paragraph 18(1)(h). On the other hand, if the hobby or pastime results in receipts of revenue in excess of expenses, that fact is a strong indication that the hobby is a venture with an expectation of profit; if so, the net income may be taxable as income from a business. The current version of IT-504, Visual Artists and Writers, discusses the concept of ""a reasonable expectation of profit"" in greater detail. Where a hobby consists of collecting personal-use property or listed personal property, dispositions should be accounted for as described in the current version of IT-332, Personal-Use Property. (emphasis mine) In other words, if it's not the type of thing where you'd make a tax deduction when you bought it in the first place, then you clearly don't need to report it as income when you sell it. Just to be absolutely clear here: The fact that you are selling them at a loss is not actually what's important here. What's important is that, if the books aren't collectibles, then you would have had no expectation of profit.  If you did have that expectation then you could have made a tax deduction when you first purchased them. So in this case, it is probably not necessary for you to report the income; however, for the benefit of other readers, in some cases you might need to report it under ""other income"" or book it as a capital gain/loss, depending on what those personal items are and whether or not you made a net profit." From my Capital Markets and Institutions assignment on 2007 - 2008 Financial Crisis   The subprime financial crisis that emerged in the summer of 2007 is much too intricate and interwoven to place the blame solely on one organisation or group of individuals.  Each actor involved is responsible for and party to—in varying degrees—the events that transpired.  Mortgage brokers (individuals)  • First line of contact between an originator and a borrower • Out to get theirs; greedy • Disregard for borrowers, only want to originate as many mortgages as possible • Engaged in controversial practices – confusing, pressuring, lying to borrowers in order to secure a mortgage • Took advantage of 2/28 mortgages in order to collect new origination fees • Offered piggyback mortgages requiring no money down  Mortgage originators (organisations)  • Began lending to subprime borrowers during the 1990s – done through brokers to whom they paid a commission • Largely supplanted loans made by the FHA through traditional lenders • Many originators acquired by large investment banks • Cashed in on and espoused the “American dream” of home ownership • Different interest rates charged to borrowers • Use of statistical software and credit scores to evaluate borrowers • Popularised 2/28 mortgages • Allowed borrowers to take out mortgages with little or no documentation • Rapidly increased $ amount of mortgages issued • In charge of servicing mortgages issued – making reasonable efforts to collect principal and interest, able to foreclose on properties when delinquent • Profited from massive fees (late and other) added when loans were delinquent • First firms to suffer from the increase in foreclosures  Investment banks  • Often acquired mortgage originators to gain yet another revenue stream • Responsible for creating CDO entities, often registered in tax havens • CDOs took on large positions in MBSs and created subordinate obligations, also CDOs • CDO entities held assets of other CDOs, creating a complex interwoven situation • CDOs were also involved with positions in other securities • IB-controlled hedge funds often hedged risks through buying highly-rated MBSs • CDOs holding long-term debt were funded through the short-term commercial paper market – high ratings secured through IB lines of credit • Also pioneered SIVs – relied on highly-rated CP market; lines of credit combined with investor equity allowed IBs to keep SIVs off B/S • IBs heavily invested in MBSs/CDOs began to run into liquidity problems • Required capital investment to remain operational – often found abroad (e.g. Abu Dhabi, Chinese, Singaporean governments) • Largely responsible for the monetary policy pursued by the Fed during 2007/2008 • Conduct raised questions as to the regulation of the entire financial industry • Contrast with their responsibility for much innovation and engineering in the financial services industry  Credit ratings agencies  • Party to major conflicts of interest • Overwhelmingly gave AAA ratings to MBSs • Agencies loosened their rating criteria and perhaps over-rated MBSs in an effort to gain more business from originators • Agencies also rated the debt of institutions that held positions in MBSs • CDOs holding MBSs obtained high ratings as well – statistical models used indicated them to be safe • Based high ratings in the commercial paper market on IB lines of credit – obliged the IBs in order to gain more business • Agency downgrades of MBSs/CDOs resulted in large IB losses, setting in motion further developments • Ratings became less useful as the MBS market froze up, with even AAA-rated MBSs struggling to find a market • Previously championed as an alternative to government intervention in the market • Role of ratings agencies heavily questioned in aftermath • Also questioned was how ratings in general should be used • RAs deflected claims that they acted irresponsibly during the subprime boom • Criticised for the large proportion of AAA-ratings given to MBSs o Argued that historical defaults on MBSs were lower than similar corporate bonds • Conflicts inherent in having issuers pay for ratings o Committees that assigned ratings were separate from negotiations regarding fees • Emphasized benefits of giving all investors free access to ratings rather than them paying for them • Wave of downgrades in 2nd half of 2007 a result of unexpectedly poor performance of subprime mortgages originated in 2006 o Attributed to: laxer underwriting standards, declines in housing prices, more restrictive borrowing standards that prevented borrowers from refinancing  Investors  • Backbone of many institutions – shareholders • Owned stock in IBs and GSEs, two major players in subprime crisis • Driving force behind institutions taking on riskier investments (e.g. MBSs) • Unwilling to inject more capital/equity into firms required them to turn elsewhere for aid • Worries that the crisis could spread to other markets (e.g. credit cards) added to worries • Grouped with IBs in being seen as responsible for the crisis o US government would not allow higher sale price for Bear Stearns to avoid appearance of bailing out investors avoid corporation tax There aren't many avenues to save on corporation tax legally. The best option you can try is paying into a generous pension for yourself, which will save some corporation tax. Buying a house You can claim deduction for the mortgage payments, but profits on selling the house will require paying capital gains tax on the profit. You can rent it out, this will be decided between your mortgage provider and your company, but the rent will go towards as income.  Buying a car Not worth it. You will have to pay Class 1A NI contribution for benefits in kind. Any sane accountant will ask you to buy the car yourself and expense the mileage. Any income generated from the cash you have is taxable. Even the interest being paid on your money is taxable. "First, the balance sheet is where assets, liabilities, & equity live. Balance Sheet Identity: Assets = Liabilities (+ Equity) The income statement is where income and expenses live. General Income Statement Identity: Income = Revenue - Expenses If you want to model yourself correctly (like a business), change your ""income"" account to ""revenue"". Recognized & Realized If you haven't yet closed the position, your gain/loss is ""recognized"".  If you have closed the position, it's ""realized"". Recognized Capital Gains(Losses) Assuming no change in margin requirements: Margin interest should increase margin liabilities thus decrease equity and can be booked as an expense on the income statement. Margin requirements for shorts should not be booked under liabilities unless if you also book a contra-asset balancing out the equity.  Ask a new question for details on this. Realized Capital Gains(Losses) Balance Sheet Identity Concepts One of the most fundamental things to remember when it comes to the balance sheet identity is that ""equity"" is derived. If your assets increase/decrease while liabilities remain constant, your equity increases/decreases. Double Entry Accounting The most fundamental concept of double entry accounting is that debits always equal credits. Here's the beauty: if things don't add up, make a new debit/credit account to account for the imbalance.  This way, the imbalance is always accounted for and can help you chase it down later, the more specific the account label the better." "The ""just accounting"" is how money market works these days. Lets look at this simplified example: The bank creates an asset - loan in the amount of X, secured by a house worth 1.25*X (assuming 20% downpayment). The bank also creates a liability in the amount of X to its depositors, because the money lent was the money first deposited into the bank by someone else (or borrowed by the bank from the Federal Reserve(*), which is, again, a liability). That liability is not secured. Now the person defaults on the loan in the amount of X, but at that time the prices dropped, and the house is now worth 0.8*X. The bank forecloses, sells the house, recovers 80% of the loan, and removes the asset of the loan, creating an asset of cash in the value of 0.8*X. But the liability in the amount of X didn't go anywhere. Bank still has to repay the X amount of money back to its depositors/Feds. The difference? 20% of X in our scenario - that's the bank's loss. (*) Federal Reserve is the US equivalent of a central bank." "A.1 and B.1 are properly balanced, but ""Business Expense"" is an expense, not an asset. The T entries should be timestamped.  The time should be equal to the time on the credit card receipts.  This will make audit and balancing easier. A or B can be used, but if the the business is to be reimbursed for personal expenses, the accounts should be renamed to reflect that fact. More explicit account names could be ""Business expense - stationary"" and ""Personal expense - lunch"" or even better ""Personal expense - cammil - lunch"".  With a consistent format, the account names can be computer parsed for higher resolution and organization, but when tallying these high resolution accounts, debits & credits should always be used. When it comes time to collect from employees, only accounts with ""Personal expense"" need be referenced.  When it comes time to collect from ""cammil"", only net accounts of ""Personal expense - cammil"" need be referenced. An example of higher resolution, to determine what ""cammil"" owes, would be to copy the main books, reverse any account beginning with ""Personal expense - cammil"", and then take the balance.  Using the entries in the question as an example, here's the account to determine ""cammil""'s balance: Now, after all such balancing entries are performed, the net credit ""Personal expense - cammil"" is what ""cammil"" owes to the business. The scheme for account names should be from left to right, general to specific." PocketSmith is another tool you might like to consider. No personal banking details are required, but you can upload your transactions in a variety of formats. Pocketsmith is interesting because it really focus on your future cash flow, and the main feature of the interface is around having a calendar(s) where you easily enter one off or repetitive expenses/income. http://www.pocketsmith.com/ I use a spreadsheet for that.   I provide house value, land value, closing/fix-up costs, mortgage rate and years, tax bracket, city tax rate, insurance cost, and rental income.  Sections of the spreadsheet compute (in obvious ways) the values used for the following tables:  First I look at monthly cash flow (earnings/costs) and here are the columns:   Next section looks at changes in taxable reported income caused by the house,  And this too is monthly, even though it'll be x12 when you write your 1040.   The third table is shows the monthly cash flow, forgetting about maintenance and assuming you adjust your quarterlies or paycheck exemptions to come out even: Maintenance is so much of a wildcard that I don't attempt to include it.  My last table looks at paper (non-cash) equity gains:  I was asked how I compute some of those intermediate values.  My user inputs (adjusted for each property) are:  My intermediate values are: