Year-end financial statements for Cochrane businesses

For a one-owner Cochrane corporation, monthly bookkeeping, payroll and the year-end financial statements with the T2 usually cost from $450 to $650 a month all-in. The year-end covers the T2 with Schedule 1 and Schedule 50, the CCA schedule, the small business deduction, T4 or T5 slips for the owner’s pay, and the instalments for the year ahead.

Who reads a Cochrane company’s statements

The audience shapes the work. For a home-based consultancy, the main reader is the CRA, through the financial statement schedules attached to the T2, and perhaps a mortgage lender looking at the owner’s income. For a downtown retailer or restaurant, a bank financing the fit-out or a landlord reviewing a lease renewal may ask for them. For a contractor, an equipment lender, a bonding company or a general contractor qualifying subtrades may want to see a balance sheet before awarding work. For a family holding company or a ranch corporation, the statements are the record a future buyer, an estate or the next generation will start from.

Each of those readers looks at different lines. A lender looks at working capital and debt. A landlord looks at whether the business can carry the rent. A bonding company looks at equity and the trend over several years. Knowing who will read them is the first question we ask, because it decides how much presentation the statements need and whether a compilation is enough.

Compilation, review or audit

A CSRS 4200 compilation engagement presents financial information that management supplies, in a format a reader can use. It provides no assurance: nothing is verified, no opinion is expressed, and it is neither a review nor an audit. For most owner-managed Cochrane corporations, that is exactly what is needed, and it is what the CRA expects to see behind a T2.

Some agreements ask for more. A loan or a lease may specify review-engagement statements within a set number of days after year end, and larger facilities sometimes require an audit. The obligation is contractual and applies whether or not it has been enforced before, so it is worth reading the reporting clause in the agreement rather than assuming. If a review or audit is required, that is a separate engagement, and we will say so on the first call rather than prepare the wrong product.

Classification decisions that move the numbers a reader cares about

A balance sheet depends heavily on where the line between current and long-term is drawn. The portion of a term loan due within twelve months is current. A demand facility is generally current in full, however long it has actually been outstanding. A shareholder loan that has sat in the business for years is current unless there is a written agreement postponing repayment. None of those decisions changes the business by a dollar, and any of them can change how a lender reads its working capital. The answer is to make each call correctly and early, and to know where the ratios sit before the statements go out.

The shareholder loan in a home-based corporation

The shareholder loan account deserves its own section, because it is where Cochrane’s home-based corporations most often go wrong. Personal spending on the business card, business bills paid from a personal account, and home-office reimbursements all flow through it. If the balance shows the owner owing the corporation at year end, the tax rules give a limited window to repay before the amount is pulled into the owner’s income. A reconciled shareholder loan schedule, updated through the year, is the single document that most improves these statements, and it ties directly to the monthly bookkeeping.

Cut-off, inventory and work in progress

Revenue belongs in the period the work was done or the goods were delivered, not the period the invoice went out. A Cochrane contractor finishing a job in the last week of the year and billing it in the first week of the next has revenue to accrue. A retailer with stock on the shelves has inventory to count and value at year end, and the cost of goods sold follows from that count. A business that receives deposits before it starts work holds them as a liability until the work is done. Each of these is a cut-off question, easy to get wrong and important to get right, because they move the profit figure both corporate returns are built on.

Equipment, vehicles and the asset register

Trades, transport and farm businesses around Cochrane carry real equipment. The statements record it at cost less accounting depreciation, while the tax return claims capital cost allowance on its own rules, and the two are reconciled on Schedule 1. Financing is shown separately from the asset, with the current portion split out. Trade-ins and disposals are recorded when they happen. Where a reader such as a lender relies on the balance sheet, an asset register that matches reality is what makes the figures credible.

Alberta corporate tax and the year end

Alberta administers its own corporate income tax, so an Alberta corporation files the provincial AT1 in addition to the federal T2. Both are built from the same statements, and preparing the statements and the returns as one exercise avoids reconciling separate versions of the same year. The current Alberta corporate rates and filing requirements are on the Alberta tax facts page, and the corporate tax hub covers the federal side and the deadlines that follow a fiscal year end.

Working remotely

EverStone is a sole practitioner CPA firm with no Cochrane presence. Cochrane engagements are delivered entirely online through secure document exchange, video meetings and electronic signature. Because the books are reviewed through the year rather than only at the end, the year-end figures are rarely a surprise. This suits incorporated consultancies, retailers and professional practices, contractors and equipment operators, and the ranch and holding corporations around Cochrane, Bearspaw and Bragg Creek.

Where the statements feed decisions as well as filings, fractional CFO support in Cochrane carries the work into forecasting and lender reporting through the year.

Year-end financial statements elsewhere in Alberta

The same service, online and at the same published fees, for owners in Calgary, Airdrie and Red Deer.

Remote financial statement work

All of it is prepared online. There is no Cochrane office and no staff based there. Because the books are looked at during the year, the year-end figures are rarely a surprise.

An owner’s corporate and personal returns are decided together, and personal tax in Cochrane is the other half.

Where a lender or an agreement calls for assurance rather than a compilation, the next question is assembling the working papers through the year.