Financial statements for Langley distributors and stock-holding businesses

One-owner Langley corporations: bookkeeping, payroll and financial statements with the T2 from $500 to $700 a month. Filings: the T2, Schedule 1, Schedule 50, CCA, the small business deduction, T4 or T5 slips and instalments.

Why inventory is the number that decides the statements

Closing inventory is a balance sheet asset that also sets cost of sales. Overstate it and margin and working capital look stronger; understate it and both fall. No other figure moves two statements at once, so every reader checks it.

It is also the figure most often produced by estimate. A warehouse count taken three weeks early and rolled forward on a spreadsheet is not a count at the date, and the gap is where a quiet margin distortion lives.

Cost, net realizable value and slow-moving stock

Inventory is measured at the lower of cost and net realizable value. Cost includes freight in, duty and brokerage, which many small distributors expense, understating inventory and margin. Net realizable value is the selling price less the cost to sell.

Slow-moving and obsolete stock fails that second test. Product unsold for three seasons is worth less than it cost, and carrying it at cost inflates the assets a lender lends against. Write it down. The inventory accounting guide covers the mechanics.

Cost formulas, and staying on one

Whether cost uses first-in-first-out, weighted average or specific identification for serialized goods, the method must be applied consistently and disclosed. With moving supplier prices, the formula alone can shift margin materially, so an undisclosed mid-stream change ruins comparison between years.

Landed-cost allocation needs the same discipline. One container of twenty product lines has one freight and duty bill, and how it is spread sets per-unit margin. Convenient allocations flatter the fastest movers.

Cut-off: goods in transit and unshipped orders

Cut-off asks who owned what on the last day of the year. Goods on the water under FOB shipping-point terms are already the buyer’s inventory and payable; goods staged but unshipped are still inventory; consignment stock at a retailer usually stays on the distributor’s books.

Each is easy to state and easy to get wrong when the warehouse and the books use different dates. A supplier invoice booked in the wrong period without its inventory hits margin twice, a common finding when a stock-heavy year end is reworked.

What an inventory-secured lender wants to see

A distributor borrowing on an operating line usually secures it on receivables and inventory, with an advance rate on each. The lender reconciles borrowing-base reports against year-end figures and takes gaps seriously; aged inventory and receivables are typically excluded.

Statements showing inventory as one line, with no measurement basis or write-down policy, invite awkward questions at renewal. Disclosing the basis and a stated write-down policy makes the file legible.

A compilation does not verify the count

This matters more for an inventory business than almost any other. A compilation engagement under CSRS 4200 presents information management supplies. The accountant does not attend the count, test the valuation or express any opinion or conclusion. It is not an audit or a review. If a lender wants independent comfort on inventory, that is a review or an audit, with its own cost and timetable.

Most owner-managed Langley distributors do fine on compiled statements. A large inventory-secured facility, a new lender or a pending sale often prompts a request for more, and an audit cannot cover a count nobody observed. Decide before year end.

Working with a remote CPA on a Langley year end

EverStone there is no Langley location. Statements, the corporate return and the supporting schedules are prepared remotely from records sent by secure upload link, with video calls when something needs discussing. Nothing requires leaving the warehouse.

The work suits incorporated wholesalers, importers, equipment and parts distributors, building-supply businesses and light manufacturers holding raw materials. Related reading: the Langley small-business CPA page and accounting for Langley inventory businesses.

For conversion cycle and margin by line, see fractional CFO support for Langley distributors.

Remote financial statement work

EverStone works with Langley businesses virtually. There is no premises in Langley, and nobody on the ground there. Calls run by video or phone, paperwork by secure email and e-signature, and statements build from records reviewed all year.

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

The year end this all feeds into is Langley.

None of this works on records that are behind, which is what bookkeeping in Langley keeps current.

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