Financial statements for St. Albert corporations

For a one-owner St. Albert 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 GIFI schedules, the CCA schedule, the small business deduction, T4 or T5 slips for the owner’s pay, the AT1, and the instalments for the year ahead.

Who reads your statements

A sole owner rarely needs financial statements for their own sake. The reason most St. Albert corporations produce them is that someone else asks. A bank wants them to renew an operating line or an equipment loan. A bonding or surety company wants them before a contractor can bid larger public or commercial work. A landlord in one of the city’s business parks may want them before signing a lease on a warehouse bay. A buyer wants several years of them before making an offer. Each reader looks for something slightly different, and knowing who will read the statements shapes what has to be right.

A compilation, a review or an audit

A compilation engagement under CSRS 4200 presents information that management supplies. It provides no assurance: nothing is verified, no opinion is expressed, and it is neither a review nor an audit. For most owner-managed St. Albert corporations, that is what the lender or bonding company asks for. Some credit agreements and larger surety facilities specify review-engagement or audited statements instead, often within a stated number of days of the year end. That obligation is contractual. Read the reporting clause in your agreement before deciding what kind of year end to commission, because a compilation delivered where a review was required does not satisfy it. What a compilation engagement is explains the standard.

Inventory and cut-off for manufacturers and distributors

The City of St. Albert lists advanced manufacturing, agribusiness, construction and logistics among the sectors in its business districts, and businesses in those sectors carry inventory. Inventory is usually the largest current asset on their balance sheet and the one most easily wrong. The year-end count has to be complete. Goods received before the year end but invoiced after need to be in both inventory and payables, and goods shipped before the year end but not yet invoiced need to be in revenue and receivables. Obsolete or slow-moving stock should be written down to what it can realistically be sold for. Each of those affects both gross margin and the current ratio, and a bank reads both.

Work in progress for contractors

For a St. Albert contractor, the equivalent of inventory is work in progress. A job half-finished at the year end has costs incurred and revenue earned that do not match what has been invoiced. Revenue needs to be recognized for the work actually performed, holdbacks receivable shown on their own, and billings in excess of work done shown as a liability. A contractor that invoices heavily early in a job and reports that as revenue looks more profitable this year and less profitable next year than it really is. A bonding company that sees the swing will ask why.

Equipment and the balance sheet

Trucks, trailers, loaders, production machinery and warehouse equipment make up much of the balance sheet for many St. Albert businesses. The statements carry them at cost less amortization, and the tax return claims capital cost allowance on its own schedule, so the two numbers differ. That is normal. What matters is that additions, disposals and trade-ins are recorded properly, that equipment financing is split between the portion due within twelve months and the rest, and that idle equipment is considered for a write-down if it is no longer expected to earn its carrying value.

Shareholder balances

An owner who pays personal expenses from the corporation, or puts personal money in to cover a slow month, creates a shareholder loan balance. On the statements it is a related-party balance that a lender will look at closely. On the tax side, a balance owed by the shareholder to the corporation that is not repaid within the time allowed can be added to the owner’s personal income. We reconcile the shareholder account at every year end and flag a growing debit balance before it becomes a personal tax problem. Shareholder loans explained covers the rules.

Alberta corporate tax and the year end

Alberta administers its own corporate income tax, so a St. Albert corporation files the AT1 provincial return as well as 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 current Alberta rates and filings are on the Alberta tax facts page.

Working remotely

EverStone is a fully virtual firm with no St. Albert office. Year-end engagements run through secure document exchange, email and video meetings, with electronic signature on the statements, the engagement letter and the returns. Inventory counts are done by your staff with our count instructions and reviewed with you afterwards. This suits manufacturers, distributors, contractors, professional practices and service businesses that need statements a lender or bonding company will accept.

Remote financial statement work

All of it is prepared online. There is no St. Albert 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 St. Albert is the other half. Where the next question is planning rather than reporting, see fractional CFO support in St. Albert.