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I am required to file taxes for my small (sole proprietorship) business and personal finances in two jurisdictions (Canada and the USA, as it happens). I have capital equipment for my business. Both jurisdictions require me to treat the purchase as a capital expenditure, and depreciate the asset over time. But they each have different rules for what depreciation I can expense each year.

How should I structure my chart of accounts to track the capital expenditures for both jurisdictions, without double-counting, inflating my asset values, or ending up with double depreciation each year? I am looking for an accounting strategy.

For what it's worth, I use GnuCash to do my bookkeeping. But, translating the accounting strategy into tool-specific bookkeeping tactics is not what I am asking here.

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  • For those voting to close because of the "accounting" word: I believe that this question is indeed "from an individual perspective", i.e. my sole proprietorship business. Questions on "Sole Proprietorships: Bookkeeping" are explicitly on-topic per money.stackexchange.com/help/on-topic . I will add the words "sole proprietorship" to the question, to make it clear how small the business is.
    – Jim DeLaHunt
    May 6, 2022 at 19:23

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You will need to track these things separately for Canadian and US tax purposes. Basically, a secondary set of 'tax books'. It is very common for accounting records to deviate from tax records where specific tax treatment is required standard accounting practice isn't followed [like mandated depreciation rates].

How you incorporate that back into your small business's bookkeeping up to you, but you'll want to be sure you track everything comprehensively in a way that would allow you to respond to queries from either the IRS or CRA.

Keeping things in a single set of books won't really be possible - and I suggest that multi-filing business returns in both US and Canada easily approaches the "please help me!" threshold of hiring an accountant versed in both tax jurisdictions (warning, this is likely to be costly if done by someone actually able to do it).

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  • I agree that the complexity of multi-jurisdiction tax filing warrants hiring an accountant. I have done so. But I ask the question because I want to have the depreciation info in my own bookkeeping, not just in the tax returns they prepare.
    – Jim DeLaHunt
    May 6, 2022 at 19:26
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    @JimDeLaHunt Unless you are trying to follow a specific set of accounting standards [ie: if a bank which loans you money has required that you follow some set standards / you have your books reviewed or audited by an accounting firm], I suggest the simplest approach - pick one of the jurisdictions, and use that as your depreciation numbers.
    – Grade 'Eh' Bacon
    May 6, 2022 at 19:28

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