Financial statements for Okotoks corporations

The year-end covers the statements, the T2 with Schedule 1 and Schedule 50, the AT1, the CCA schedule, the small business deduction, T4 or T5 slips for the owner’s pay, and the instalments for the year ahead.

What year-end statements are, and who reads them

A set of year-end financial statements is a balance sheet showing what the corporation owns and owes at the year-end date, an income statement showing revenue and expenses for the year, and supporting notes. For most owner-managed corporations in Okotoks they are prepared as a compilation engagement under CSRS 4200: the CPA compiles the statements from the information you and your books supply, and issues a compilation engagement report alongside them.

The audience is wider than the CRA. Banks ask for statements when you apply for or renew a credit facility or an equipment loan. Landlords ask for them before signing a commercial lease. Bonding companies and larger general contractors ask trades companies for them. Buyers, investors and incoming partners start with them. And the T2 and AT1 are both built from the same figures, so any change to the statements flows through to two tax returns.

Compilation, review, audit — and what you actually need

A compilation provides no assurance. Nothing is verified, no opinion is expressed, and it is neither a review nor an audit. For most small Okotoks corporations that is exactly right: the owner knows the business, the bank is lending against personal guarantees and assets, and the cost of assurance would outweigh its value. But some credit agreements, funding programs and contracts specify the level of statements required, and the requirement is contractual whether or not it has been enforced before.

Before deciding what kind of year end to commission, read the reporting clause in your loan or funding agreement. If it calls for a review engagement or an audit, that is a separate engagement with its own scope. What a compilation engagement is sets out the differences.

Classification calls that change what a lender sees

A lender reading statements looks first at working capital — current assets against current liabilities — and at debt. Several classification decisions move those figures without changing the business by a dollar. The portion of a term loan or vehicle loan due within twelve months is current. A demand operating line is generally current in full. A shareholder loan owed to the owner is current unless there is a written agreement postponing it, and a shareholder loan owed by the owner raises its own tax question if it is not repaid in time.

None of those calls should be made for convenience. But they should be made correctly and early, so you know how the balance sheet will read before it goes to the bank, not after.

Revenue, cut-off and work in progress

Many Okotoks corporations earn revenue unevenly: a trades company finishing jobs before winter, a consultant billing on project milestones, a producer with a busy holiday season. Revenue and the costs that support it need to land in the period the work was done rather than the period the invoice went out. Work completed before the year end and billed after it is accrued. Deposits received for work not yet done are a liability until the work is performed. Holdbacks on construction contracts have their own timing. Getting cut-off right is what makes one year comparable to the next, and what stops the income statement telling a lender a story that is not quite true.

Equipment, vehicles and the gap between book and tax

The statements record amortization on equipment and vehicles over their useful lives. The T2 claims capital cost allowance under the tax rules instead, at prescribed rates by class. The two rarely match, and the difference is reconciled on Schedule 1. For a trades or agricultural corporation with significant equipment, keeping a fixed-asset register — date, cost, class, disposals and trade-ins — is what makes both the statements and the CCA schedule straightforward instead of an annual reconstruction.

Inventory for producers and retailers

Food and beverage manufacturing and independent retail are both part of the Okotoks economy, and both carry inventory. Statements need a year-end count, a costing method applied consistently, and a decision about slow-moving or spoiled stock. Inventory errors move gross margin and taxable income in the same direction, so a count that is rushed or estimated shows up twice. We agree the count date and method with you before the year end.

Alberta corporate tax and the year end

Alberta administers its own corporate income tax rather than having it collected federally, so an Okotoks corporation files the AT1 with Alberta Tax and Revenue Administration in addition to the federal T2. Both are built from the same statements, and preparing the statements and both returns as one exercise avoids reconciling separate versions of the same year. The corporation also files an annual return with the Alberta Corporate Registry to stay in good standing, which is a registry filing rather than a tax return. Current Alberta corporate rates are on the Alberta tax facts page; the federal side is on the corporate tax hub.

Working remotely

EverStone is a sole practitioner CPA firm with no Okotoks presence. Okotoks engagements are delivered entirely remotely through secure document exchange, video meetings and electronic signature. Because the books are looked at during the year rather than once, the year-end figures are rarely a surprise.

This suits incorporated trades and construction companies, professional and technical consultancies, healthcare practices, producers and retailers, and the farm corporations of Foothills County. Related pages: Okotoks corporate tax and Okotoks bookkeeping.

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. Every Alberta city we serve is listed on the Alberta accounting page.

Remote financial statement work

All of it is prepared online. There is no Okotoks office and no staff based there. Because the books are reviewed 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 Okotoks is the other half.