How to deal with RRSP's (Canada)

[R. Victor Klassen]

The remaining unanswered question, which I think is part of the original question, is what to do about withdrawals being treated as taxable income?

For those in the US, an RRSP is roughly equivalent to an (non-Roth) IRA.  Contributions are tax deductible, earnings are tax-deferred; withdrawals are taxable.

So I think the question is, how to account for contributions to a tax-deferred account - not really expenses, but they do change current taxes owed - and distributions: while it is truly a transfer from one asset account to another, the distribution is treated as income by the taxing authorities.

> On Jan 2, 2018, at 6:36 PM, DaveC49 <davidcousens at bigpond.com> wrote:
> 
> Larry,
> 
> I'm not familiar with the details of RRSP accounts in Canada so any comments
> here are general in nature and not taken as accounting advice per se. 
> 
> If it is a retirement savings account you would treat it as an Asset.
> Depending upon the conditions associated with withdrawal of funds from the
> RRSP you would most likely classify it as either a long term fixed asset or
> a current asset. For personal accounting this distinction is not as
> important as in business accounting, but can be still useful.  (You could
> simply record eveything just under Assets if you wished and this met your
> requirements). 
> 
> If you can withdraw funds at any time at your discretion, then you would
> normally classify it as a current asset otherwise as a fixed asset. If there
> are rules about how much you can withdraw and how often in the future, you
> could continue to classify it as a fixed asset when you gain ready access to
> the funds at some future time. If the funds become freely available (on
> retirement for example), you could reclassify it as a current asset at this
> point in time.  This simply requires having placeholder subaccounts for
> Fixed  Assets and Current Assets under your Assets top level account and
> changing the parent account for your RRSP from Fixed Assets to Current
> Assets for example. It will just change what heading it appears under on the
> Balance Sheet
> 
> If you are paying into the RRSP yourself, you are not creating an expense
> when you transfer the money even though it may  actually go to whoever holds
> and maintains the RRSP account  (it may be your bank for example) as you
> still retain ownership and the right to access the funds in the future.
> 
> You are in this case exchanging one asset (cash in your bank account) for
> another asset (the increase in the balance of the RRSP), so there is no
> expense component of the transaction. The basic transaction will be:
> 
>                                                                  Debit                  
> Credit
> Asset:Bank:CheckAccount                                                        
> xxxx
> Asset:RRSP                                                  xxxx
> 
> 
> 
> If you select double line mode (Menu->View->Double Line) when you click on a
> transactionof this type in an account register e.g. your RRSP account
> Register you should lines corresponding to both of the above components.
> 
> Interest should be recorded as:
>                                                            Debit                           
> Credit
> Asset:RRSP                                              yyy
> Income:InterestRRSP                                                                  
> yyy
> 
> Whether that interest is taxable or not under your local legislation will
> determine whether you classify it under TaxableIncome or NonTaxableIncome.
> 
> When you withdraw funds from the RRSP to your bank account, the transaction
> will be the same as the deposit above with a reversal of the debit and
> credit entries,i.e.:
> 
>                                                                  Debit                  
> Credit
> Asset:Bank:CheckAccount                              xxxx
> Asset:RRSP                                                                            
> xxxx
> 
> Hope this helps with the recording of your RRSP.  If your records are in
> anyway critical (e.g. tax and legal implications) it would be advisable to
> seek professional advice locally.
> 
> David Cousens
> 
> 
> 
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> David Cousens
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