Corporate tax accountant for Langley corporations

Closing stock is the largest single judgement

In a distribution business the difference between a good year and an average one is often the closing stock figure rather than anything that happened commercially. Every dollar carried forward in inventory is a dollar taken out of cost of sales, so the valuation directly sets taxable income. The Income Tax Act permits inventory to be valued at the lower of cost and fair market value, or the whole inventory at fair market value, and the method chosen must be used consistently from year to year. Switching methods because one produces a better result in a particular year is not available, which is precisely why the choice deserves attention when the business is set up rather than at the first year end.

What "cost" includes for goods in a Langley warehouse

Cost is not simply the supplier’s invoice. For imported goods it includes freight, duty and customs brokerage, and for a business bringing containers through the port and trucking them out to Gloucester or Port Kells those landed costs are a real part of the figure. Leaving them in general expenses understates inventory, overstates the current year’s deduction, and creates a mismatch that grows every year the practice continues. It also makes the gross margin meaningless as a management number. Building landed cost into the way goods are received is one of the few accounting decisions that improves both the tax position and the operating information at the same time.

Writing down stock that will not sell

Obsolete, damaged or superseded goods are the other half of the valuation question. Where fair market value has fallen below cost, valuing at the lower of the two produces a deduction — but it has to be supportable, and a general provision expressed as a percentage of stock is not a deductible reserve. What supports a write-down is evidence about specific goods: identified lines, the reason value has fallen, and what happened to them afterwards. A distributor that physically segregates dead stock and records the decision has a defensible position. One that books an unexplained adjustment on the last day of the year does not.

Bad debts and the wholesale credit cycle

Selling into the trade means selling on terms, and some of those receivables will not be collected. A specific debt established as uncollectible during the year is deductible; a general allowance set aside against receivables at large is not. The distinction is about identification and evidence — which customer, what was done to collect, and on what basis it was concluded that recovery would not happen. For a Langley wholesaler carrying a long receivables ledger this is worth reviewing before the year closes rather than after, because the deduction belongs in the year the determination is made. Writing off bad debts covers the requirements.

PST on the purchasing side

British Columbia charges 7% PST alongside the 5% GST as two separate registrations with two separate returns. For a distributor the important feature is that goods bought for resale are generally acquired without PST, while goods and equipment bought for use in the business generally attract it and that tax is not recoverable — it is a cost embedded in the asset or the expense. Mixing the two in the ledger overstates recoverable tax and misstates the cost of the shelving, forklift or software it applied to. The BC PST guide covers where the line falls.

A year end chosen around the stock count

Because so much of the return depends on a physical count, the fiscal year end should be set where counting is actually practical. A December year end for a business whose warehouse is at its fullest in December guarantees the least accurate count of the year, taken by the people with the least time to do it. Moving the year end to a trough in the cycle produces a smaller, cleaner count, a balance sheet that better represents the business, and a filing deadline away from personal tax season. British Columbia’s rates — 11% and 27% on a $500,000 limit — apply either way; the accuracy of what they apply to is what changes.

Remote, from one office in Abbotsford

EverStone is a sole practitioner CPA firm at 32615 South Fraser Way in Abbotsford. There is no Langley office, no Willowbrook location and no local staff. The engagement runs online: records by secure upload, inventory and receivables reviewed against the underlying schedules, e-signature and electronic filing. Abbotsford is a short drive east, but no part of preparing a corporate return requires either party to make it. The same CPA handles the file from the first question through to the filed return.