Clear financial information for Canadian businesses
Financial Accounting That Turns Business Activity Into Useful Reports
Financial statements should do more than satisfy a deadline. They should bring together the company’s transactions in a way that helps owners, management, lenders and other users understand its financial position and performance.
Accountico provides flexible financial accounting and bookkeeping support for Canadian corporations and growing businesses. Services can include general-ledger preparation, reconciliations, financial statements, reporting, tax preparation and ongoing accounting support.
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The purpose behind the numbers
What Is Financial Accounting?
Financial accounting is the process of recording, summarizing and reporting a business’s financial transactions. It draws information from the general ledger and supporting records to prepare statements that describe what the business owns and owes, the revenue and expenses it recorded, changes in equity and the movement of cash.
A financial statement is not normally intended to declare what the entire company is worth. Instead, it provides structured information that readers can use alongside other facts when assessing performance, financial position, risk or financing needs.
Owners and Management
Use periodic reports to review profitability, cash flow, spending, working capital and progress against business plans.
Lenders and Investors
May request financial information when assessing credit, financing, investment risk or the business’s ability to meet its obligations.
Tax and Other Users
Financial information supports corporate tax preparation and may also be used by accountants, lawyers, shareholders, suppliers or regulators.
A stronger reporting foundation
How Financial Accounting Can Help Your Business
Accurate reports cannot guarantee growth or financing, but they give decision-makers better information and make important conversations easier.
- Understand financial health: review assets, liabilities, revenue, expenses, equity and cash movements.
- Identify trends: compare periods to see where revenue, margins or operating costs are changing.
- Support tax preparation: maintain records that can be mapped into corporate tax and GIFI reporting.
- Prepare for financing: respond more effectively when lenders or investors ask for current financial information.
- Improve credibility: present organized, consistent reports to external users.
- Plan expansion: assess whether cash flow and working capital can support hiring, equipment or new markets.
Understanding the reports
The Main Components of Financial Statements
The precise presentation depends on the reporting framework and the needs of the business. A set of financial statements commonly includes the following components.
Statement of Financial Position
Often called the balance sheet, it presents assets, liabilities and equity at a particular date. It helps readers consider liquidity, debt and the resources available to the business.
Income Statement
Also commonly called a profit-and-loss statement, it reports revenue, expenses and profit or loss over a period. These are two names for the same core report, not separate statement types.
Statement of Changes in Equity
Explains movements in retained earnings and other equity balances, including profit, losses, dividends or owner-related transactions.
Statement of Cash Flows
Organizes cash movements into operating, investing and financing activities, helping explain why profit and cash on hand are not always the same.
Notes and Supporting Information
Describe the basis of accounting, significant policies, relevant details and other information needed to understand the statements.
Flexible outsourced support
Financial Accounting Services From Accountico
The scope can be adapted to the size of the business, the condition of its records, reporting deadlines and who will use the resulting information. Accountico can support a recurring monthly process, year-end preparation or a defined cleanup project.
- General-ledger preparation: organize account balances and transaction activity into a consistent ledger.
- Bank and credit-card reconciliations: compare accounting balances with third-party statements and investigate differences.
- Accounts receivable and payable support: maintain information about customer balances, vendor bills and payment activity.
- Financial-statement preparation: prepare appropriate reports from the underlying accounting records.
- Financial-report analysis: discuss changes in revenue, expenses, margins, balances or cash movement.
- Compilation engagements: assist with compiled financial information where the engagement and professional requirements are appropriate.
- Bookkeeping cleanup: address missing reconciliations, inconsistent coding and incomplete historical records.
- Payroll accounting: record payroll activity and support applicable payroll reporting and remittances.
- Tax planning and preparation: coordinate the accounting information needed for applicable returns.
- Corporate T2 preparation: use reviewed financial information in the corporate tax-filing process.
- CRA correspondence support: assist with accounting information requested by the Canada Revenue Agency where included in the engagement.
- Year-round accounting support: address questions and missing information before they become year-end problems.
Financial information and corporate tax
How Financial Statements Connect to a T2 Return
Canadian corporations generally include complete financial statement information for the tax year through the General Index of Financial Information, commonly called GIFI. GIFI uses standardized codes for items found in the corporation’s statements.
The related schedules can include Schedule 100 for balance-sheet information, Schedule 125 for income-statement information and Schedule 141 for additional information. A first return may also require opening balance-sheet information. Special circumstances and exceptions can apply.
Accounting income is not automatically the same as taxable income. The tax return may include adjustments that reconcile financial-statement income with income for tax purposes.
A year-end file may include
- Trial balance and general ledger
- Bank and credit-card reconciliations
- Accounts receivable and payable
- Asset purchases and disposals
- Loan and shareholder balances
- Payroll and sales-tax reports
- Supporting documents for unusual items
An important terminology update
Compilation Engagements and “Notice to Reader”
Many Canadian business owners still use the familiar term “Notice to Reader.” Under the current Canadian standard, the service is described as a compilation engagement, and the accompanying communication is a compilation engagement report.
In a compilation engagement, the practitioner assists management in preparing compiled financial information using the basis of accounting described in the information. A compilation does not include the procedures performed in an audit or review, and it does not provide assurance.
Before the work begins, it is important to understand who will use the information and whether a compilation, review, audit or internally prepared statement is appropriate.
Financial statement service levels are different
- Internally prepared statements: reports produced from the business’s accounting records without an external assurance report.
- Compilation engagement: compiled information with no assurance provided.
- Review engagement: limited assurance based primarily on inquiry, analytical procedures and other required work.
- Audit engagement: reasonable assurance supported by more extensive audit procedures.
Better statements begin earlier
Why Bookkeeping Quality Matters
Financial statements are only as dependable as the records underneath them. Missing invoices, unreconciled accounts, personal transactions in business accounts or inconsistent expense coding can slow down reporting and lead to avoidable year-end questions.
Keeping the books current throughout the year makes statement preparation more efficient. It also gives management useful information while there is still time to act—not months after the period has ended.
A sound monthly routine can include
- Recording and reviewing business transactions
- Reconciling bank and credit-card accounts
- Reviewing outstanding customer and supplier balances
- Checking payroll and sales-tax accounts
- Collecting missing bills and supporting documents
- Reviewing unusual or negative account balances
- Preparing periodic reports for management
A service matched to the business
When Outsourced Financial Accounting Makes Sense
Outsourcing can be useful when a business has outgrown basic bookkeeping but does not need—or is not ready to hire—a full internal accounting team. It can also help when existing staff handle daily transactions but need support with year-end statements, reporting or tax preparation.
Pricing depends on the volume and quality of the records, the complexity of the business, the reporting framework, the service level required and the deadlines involved. A clear scope helps avoid paying for work the business does not need.
Questions to discuss before starting
- Who will use the financial statements?
- Does a lender or other third party require a specific engagement?
- How current and reconciled are the bookkeeping records?
- Which reporting periods and deadlines apply?
- What accounting software and supporting systems are in use?
- Which responsibilities remain with management?
- What is included in the quoted accounting scope?
Frequently asked questions
Financial Accounting Services FAQ
What is the difference between bookkeeping and financial accounting?
Bookkeeping focuses on recording and organizing transactions and maintaining the supporting accounts. Financial accounting uses those records to summarize and report the business’s financial position and performance. Reliable financial statements depend on reliable bookkeeping.
What financial information accompanies a Canadian T2 return?
Canadian corporations generally report complete financial statement information using the General Index of Financial Information, or GIFI. Common schedules include Schedule 100 for balance-sheet information, Schedule 125 for income-statement information and Schedule 141 for additional information. Requirements vary with the corporation and return.
Is a profit-and-loss statement different from an income statement?
No. “Profit-and-loss statement,” “P&L” and “income statement” are commonly used names for the report showing revenue, expenses and profit or loss over a period.
What is a compilation engagement?
In a compilation engagement, a practitioner assists management in compiling financial information using an identified basis of accounting and issues a compilation engagement report. The engagement does not provide audit or review assurance. It is the current service commonly associated with the older “Notice to Reader” terminology.
Can financial statements help with a business loan?
Lenders commonly request financial information when reviewing an application, but accurate statements do not guarantee approval. They help the lender assess the business using organized information, while the final decision also depends on credit, security, cash flow and the lender’s policies.
How much do outsourced financial accounting services cost?
Cost depends on transaction volume, the condition of the books, number of accounts, reporting frequency, business complexity, deadlines and whether the work is bookkeeping, statement preparation, compilation, review, audit or tax preparation. A review of the records is usually needed before defining the scope.
Information note: This page provides general information, not accounting, assurance, legal or tax advice. The appropriate reporting framework, engagement and filing treatment depend on the business and the intended users of its financial information.
Start with a conversation
Get Financial Reporting Support Suited to Your Business
Tell us what records you currently have, who needs the financial information and which deadlines are approaching. Accountico can discuss a practical scope for bookkeeping, statements, reporting and tax preparation.