Earla Riopel's New Business and Personal Website

Earla Riopel and Related Sites

Have recently invested on a website:
It’s mostly for freelance writing, accounting and business related work.

This Blogger site will still carry most of my daily networking activities links.

Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites  Website Twitter ; LinkedIn ; Facebook ; Blog


Work Related Info

An  experienced T1 Income Tax Preparer since 1991 - timeline can be found at LinkedIn

Related Qualifications: 

Have taken Income Tax courses and training through:

·                   ICABC – former Graduate Admission Program (Income Tax Course)
·                   UBC – Diploma in Accounting Program (Income Tax Course)
·                   CRA – Tax Preparation Training Program
·                   Have been preparing Income Tax Returns since 1991 to present

Other qualifications:
·                   US CPA Exam Passed Sections: Regulations (including Income Taxes) in 2009, Auditing in 2008 and Business Law in 1999.

·                   Reasonable rates.

For online referencesLinkedInTwitter; Blogger

Looking forward to hear from you,

Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites: Website ; Twitter  ; LinkedIn ; Facebook Blog 


Preparing for the Next Fiscal Period

Granville Island Market, Vancouver, BC (Canada)
Finally, we reached the last part of the “7 Basic Things You Need To Know During Start-up Year”

It was so much fun writing the last 6 issues. Hopefully, they have been helpful to new entrepreneurs and for some existing ones.

Again, here’s the complete list of the "7 Basic Things You Need To Know During Start-up Year":

(1) Types of Business Organizations
(2) Business Product to sell and manufacture and service to perform
(3) How to keep business records
(4) Planning to have employees or sub-contracting
(5) Year-end Requirements
(6) Dealing with the taxman (Canada Revenue Agency)
(7) Preparing for the next fiscal period

UBC Campus, Vancouver, BC
Preparing for the Next Fiscal Period

New fiscal period is like New Year. It’s a fresh start for some things that you wanted to accomplish in the last fiscal period - but didn’t happen. Whatever they are, this is your chance.

Things to Do during the Next Fiscal Period:

a) Consistency in record keeping
b) Reconciliation of prior year’s amounts
c) Meeting company’s obligation to governing agencies and others
d) Interim financial statements reporting
e) Managers finding better ways of reaching goals and objectives

Downtown Seattle, WA, USA
Consistency in Record Keeping

There should be a consistency in business record keeping. It is required by law - the fair presentation of financial statements, and in accordance with generally accepted accounting principles (GAAP).

To start of the new accounting cycle - last year’s financial records will be used as the opening balances, except for income and expenses amounts. Last year’s Income and Expense amounts which have been brought down to zero balances, and closed Income Summary to Retained Earnings will be applied. Closing last year’s books is a way of separating accounting business activities for each year. Balance Sheet accounts are considered as permanent accounts, so there will be no closing entries required during end of fiscal period, ending balances will be the opening balances for the new fiscal period.

Downtown Vancouver, BC (Canada)
Reconciliation of Prior Year’s Amounts

Reversing entries for certain adjusting entries performed during end of prior period are reversed on the first day of the accounting period, except for depreciation, bad debts and other estimated amounts adjusting entries. Though reversing entries process is considered optional by most accountants, however reversing entries are applied for the sake of simplification of subsequent transactions, as if adjusting entries were not recorded in the prior year.  This method is more like a bookkeeping mechanics than an accounting’s concepts, principles, and more on accrual than cash method basis of accounting.

Year-end book and bank reconciliation should be performed, making sure that all deposits in transit, outstanding cheques, and bank charges are accounted in the prior year are matched and reflected in the financial statements. In addition, all prior period accounting errors and adjustments are accounted as well. Depending on each transaction, they are either added back/deducted in the beginning balance of the current fiscal period’s Statement of Retained Earnings, to correct/adjust balance presented in the current Balance Sheet of the company.
Kits Beach, Vancouver, BC (Canada)
Meeting Company’s Obligation to Governing Agencies and Others

Just like in our personal life, we have to make sure that we have the necessities to perform our daily activities. The same thing with business, it has to make sure that it pays its rent or lease (if it doesn’t owned its business place). Also, the company has to have licences to operate the business, thus the company has to renew its business licence and insurance, renew incorporation certificate, vehicle licence and insurance, pays its utilities, and other related due accounts.

Also, making sure that the company files its income tax related to the business, as an owner, partner, or shareholder, as a partnership (if needs to file) or corporation itself. Please refer for more detailed information in dealing with tax authority in my last article, part 6 of 7.
Locarno Beach, Vancouver, BC (Canada)
Interim Financial Statements Reporting

Besides the usual gathering of raw data, like monthly bank reconciliation, and recording of other business related transactions, management will always have to find ways of improving the performance of the company. Financial statements serve as indicators of company’s performance, an end product of the bookkeeping cycle, and applicable laws applied during the preparation. Sometimes management will use external auditors too, for additional credibility to financial statements presented.

Management will likely use the most recent financial statements or have an interim financial statements generated each month or every quarter for decision-making purposes. Interim Financial Statements are more for internal use and for specified parties only, not all phases of accounting cycle are performed, thus adjusting entries, closing entries, and post closing entries trial balance are not included. 

Managers Finding Better Ways of Reaching Goals and Objectives

Each business is different, thus it is important for managers to make decision according to company’s goals and objectives. Usually managers’ performance on their day-to-day operation of the business is reflected on financial statements presented. Financial statements are usually influenced by users’ requirements, preparer’s role and intentions, complexity of business, and the company’s needs of funds. Thus, managers should consider accounting policies that fit for the company’s situation. They should be able to find ways of solving issues through the ability of evaluating the situation and applied appropriate solution.

Managers should always focus on objectives, facts and constraints for every situation. They have to be able to interpret the financial statements properly, as to the preparer’s criteria used, materiality level placed on each transaction recorded, and to use it appropriately in the decision process. Also, there should be consistency on criteria and policies applied in order to established credibility on the financial statements.

Furthermore, managers should find ways of designing a system how to deal in times of inflation and price changes, which historical data and the accrual method might not be the best basis for decision making for financial statement users. It is important for managers to see the true picture of its financial statements, especially for non-cash items. They should be able to find alternatives and apply measurement that make sense and address the issue.

Managers should monitor items in the balance sheets that are susceptible to fast deflation, like long-term assets such as fixed cost, investments in stocks, and derivatives (financial instruments). Also, keep an eye on your stocks and bonds for dilution and higher interest on long-term liabilities. Though owners enjoy the tax deductibility of interest on borrowed funds for investment, but for how long you can pay these higher interests. Market risk can definitely affect your business, especially when it becomes larger, thus extra monitoring is crucial.

Also, managers should be able to monitor profits generated and the liquidity of the assets acquired. They have to make sure that before directors can declare dividends to shareholder, or owners can withdraw funds, that funds are coming from company’s earnings and not from owners’ investments. This is to ensure the long term existence of the company. Thus application of certain ratios are encouraged as to profitability, liquidity, activity and coverage ratios of the company’s financial statements amounts, especially ratio analysis such as return on investments, debt-to-equity ratio, and so on.

In times you might expand your business and have subsidiaries. As a parent company, though overall you have healthy net income showing on your consolidated financial statements, but keep an eye on subsidiaries that are losing money and deal with them separate for improvement. Likewise, in some cases, your income statement might be showing a net loss because of a huge amount of depreciation or/and losses related to your fixed and related assets. Keep an eye on the difference between cost vs. expenses that affect your net income.

Running a business can be so exciting if you have the know-how-to-survive-and-succeed kit. A good manager can easily detect problems, prioritize their importance to the organization, always finds effective solution or best alternatives in solving the problems.  They are always able to provide answers to questions such as: Is the company bringing enough funds to meet its obligation? Is the company making healthy profits? Are the shareholders satisfied with their returns on their investment? At what level does the company credit rating is? Is there any room for improvement and expansion?
Most managers are problem solvers, but there will be times when they get burn out and lost their motivation. Therefore, directors should be able to step in this situation, encouraged and inspired managers and all staff working under them to always think the best for the company. The company might be able to generate additional income through expansion of the business, produce and sell other related products, hiring more people for support. Always remember, good people are assets to your company. Try to help and support them when they need you. So, if the business is doing well, probably an increased in wages, or provision of added benefits, like bonus plan, stock options, or other incentives on productivity are not too much to ask. They are definitely a few of driven factors in the retention of staff, long-term existence and profitability of the company.


I hope all the “7 Basic Things You Need To Know During Start-up Year” have been helpful to you, either you are thinking to start your own business or even for current businesses that just need some extra pointers.

Also, I hope you enjoyed browsing a few of the thousands of pictures taken from my collections, from few years of being an amateur photographer!:) Good luck with your business. 

Please feel free to leave comments/inquiries or you may contact me at:

Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites: Website ; Twitter ; LinkedIn ; Facebook Blog 


Dealing with the Taxman

Writing these mini-parts of “7 Basic Things You Need To Know During Start-up Year” has been exciting for me. I hope you find the last 5 parts helpful for your new business adventure, or even for those businesses that are already in existence and still finding ways of improvement.
Picture Courtesy of A. Riopel
Again, here’s the complete list of “7 Basic Things You Need To Know During Start-up Year”:

(1) Types of Business Organizations
(2) Business Product to sell and manufacture and service to perform
(3) How to keep business records
(4) Planning to have employees or sub-contracting
(5) Year-end Requirements
(6) Dealing with the taxman (Canada Revenue Agency)
(7) Preparing for the next fiscal period
Picture courtesy of Brain Hosting
In the last issue I wrote about year-end requirements. At this time of the year, income and expenses for the tax year being reported should have been included and presented in the financial statements. Now it’s time for the company to get ready all information for Canada Revenue Agency (CRA), or other governing tax agencies (for other countries).

Each country has its own policies and procedures on their filing requirements. Most of these requirements are somewhat similar and applicable to all taxpayers worldwide, especially in Canada and the US. At this issue I will be referring more based on Canadian taxation system, as an example.

Preparing your business income tax filing requirements is mainly based on the type of business organizations you have. I wrote about types of business organizations during the first issue, and again here they are: (1) sole proprietorship, (2) partnership and (3) corporation. These 3 types are taxed according to their business formation.
Picture courtesy of Brain Hosting
 Sole Proprietorship

An owner of a sole proprietorship will be reporting his or her business activities through inclusion to their Individual T1 tax return. A sole proprietor will be using a calendar year end (December 31st) of reporting of income and expenses, using the accrual method. Accrual method of accounting is described as recording of income when earned and expenses when incurred during the 12-months business operation activities. However, a cash method is acceptable for commission people, thus income is reported upon received of amount and record expenses when they are paid.

The company’s Income Statement accounts will be reconciled for reporting of net income for tax purposes. Not all income and expenses stated in the company’s Income Statement can be all included as income and allowable deductions, thus reconciliation is required. A completed T2125, Statement of Business or Professional Activities form will be attached to the T1tax return. In addition, information related to net business or professional income will be added onto individual taxpayer’s T1 Total Income.

Also, contribution related to Canada Pension Plan (CPP) and Employment Insurance (EI) for Self-employment as part deduction and non-refundable credits are reported as well. A completed Schedule 8,  Contributions on Self-Employment and Other Earnings, which include the contribution of CPP through employment (as per T4slips), and self-employment are combined, and contribution is required upon going over total income allowable for CPP threshold. As to Employment Insurance (EI) deduction, effective  January 2010, self-employed have the choice of receiving employment insurance benefits through paying employment insurance premiums. Paid EI premiums are deductible by self-employed, a Schedule 13, Employment Insurance Premiums on Self-Employment and Other Eligible Earnings must be completed.

Filing deadline for self-employed or with self-employed spouse is June 15th of each year. However, all balance amount owing must be paid on April 30th, or else penalty charges will be charged for late payment.  
Picture courtesy of Brain Hosting

Partnership taxable income is reported as a “flow through” self-employment income to each partner of the business. Depending on total numbers of partners (5 or less partners) in the business, partnership is not required to file a T5013 Partnership Information tax form; however for over 6 partners the company must file an information tax form.

Like sole proprietorship, partnership’s Income Statement accounts will be reconciled for reporting of net income for tax purposes.  A completed T2125, Statement of Business or Professional Activities form will be attached to each partner T1tax return, with related information of partners’ share of the business or profession activities. Each partner’s share of net business or professional partnership income will be added onto individual taxpayer’s T1 Total Income.

In addition, a Schedule 8, Contributions on Self-Employment and Other Earnings and Schedule 13, Employment Insurance Premiums on Self-Employment and Other Eligible Earnings must be completed, just like required for sole proprietorship.

Filing deadline for reporting of partnership taxable income is the same as required for sole proprietorship, self-employed and taxpayer with self-employed spouse is on June 15th of each year. In addition, all balance amount owing must be paid on April 30th, or else penalty charges will be charged for late payment. 
Picture courtesy of Brain Hosting

Unlike sole proprietorship, and partnership, corporation’s taxable income is reported by the corporation itself, and reported by shareholders onto their T1 Individual Income tax return upon dividends received from corporation during the year. Thus, corporation taxable income is being taxed into two levels: corporation and shareholders, and double taxation happened.

Corporation has its own advantages and disadvantages as far as taxation. Besides having a limited liability obligation to shareholders, considered as a separate entity, and unlimited life of existence and easy transferability of ownership, a corporation has some advantages as far as payment of taxes as well.
Depending on shareholders’ status, location, where they file their T1 Individual Income tax return, both the corporation and shareholders can enjoy: (1) Tax Reduction (2) Tax Deferral and (3) Income Splitting privileges.
Picture courtesy of Brain Hosting
Tax reduction is enjoyed by shareholders who have higher individual tax rate. Having a corporation, shareholders can enjoy the lower tax rate of a corporation. In addition, benefits to small businesses that are controlled by Canadian shareholders are given. Not only that this type of corporation enjoys the federal tax abatement deduction, but also enjoys the additional deduction for being a small business too. Also some regions are given additional assistance in the form of investment tax credit, and some activities like, manufacturing and processing profits are given support through additional deduction as well.

Tax deferral is a strategy applied by corporation in minimizing tax payments, and also related to the double taxation of the corporation’s income. The earnings are left in the corporation instead of paying shareholders right away. Depending on retained earnings that corporation would like to keep, and each shareholder’s individual income tax rate during that year, tax payment is being deferred on earnings in the corporation for lower corporate tax rate, and timing the declaration of dividends to shareholders.

Income Splitting is commonly used for corporations owned by family members as shareholders. Earnings are spread out and paid as dividends to family members who have lower individual income tax rates, available deductions (like RSSP) and non-refundable credits and other credits for individual taxpayers.

As to preparation of corporation’s T2 tax return, Income Statements will be reconciled for tax purposes, and some items will be added back and deducted upon reconciliation process. The T2 Corporation Income Tax return will be filed by the corporation after 6 months of the end of fiscal period. For example, if the fiscal year-end of the corporation is March 31st, therefore the filing deadline will be September 30th 
Picture courtesy of Brain Hosting
Lastly, the following procedures can be helpful in the preparation of your personal and business income tax returns.

8 Helpful Tips in Preparing your T1 or T2 Tax Return:

(1)   Hiring a Professional Tax preparer or Do it yourself tax preparation
Defending on the complexity of your business, ask yourself if you need the service of a tax professional or you prefer to do it yourself.

(2)   Using the right T1 or T2 tax forms and schedules
If you prefer to prepare your T1 or T2 tax return yourself, find the right income Tax Form or Tax Software approved by CRA for your type of business. You can visit Canada Revenue Agency (CRA)  website for information, download and print, or request the forms by mail. In addition, just for T1 preparation, a few tips from this related blog: Tips in Preparing T1 Canadian Tax Return

It is easier to use tax software than a T1 or T2 paper tax return since it does the calculation and places the amounts to related appropriate boxes automatically. But if you prefer to use a T1 or T2 paper return, make sure to design a T1 or T2 tax form template  (from scratch) using a spreadsheet (Excel) to work with your T1 or T2 paper form to eliminate calculation errors and avoid erasures for corrections.

With the use of a spreadsheet, make sure the T1 or T2 tax form are connected to all related schedules. This might take a little work for the first year of using this spreadsheet tax template, but it will become easier for the following tax years since you only need to edit little information, like changes in tax rates, deductions and credit amounts). Most of all, having an accompanied spreadsheet T1 or T2 tax form format is inexpensive, and guaranteed your calculations are almost error free (as long as items are perfectly placed themselves).

(3)   Read all items listed on T1 or T2 tax forms and schedules
If using a paper tax return, before filling in the amounts, first read all the items on your CRA T1 tax form (for sole proprietorship and partnership) and CRA T2 tax form (for corporation), and all related schedules accordingly. This procedure is applicable if using tax software too. You can browse CRA T1 or T2 tax forms, or print a blank hard copy for easy reading.

(4)   Gather all required information for your T1 or T2 tax forms and schedules
Once you know what items are listed in this CRA tax forms, gather all information like source documents (receipts, T-slips, and related statements) and financial statements (income statements and balance sheet) that are related to your business.

(5)   Start your T1 or T2 tax form by filling in information for the first page only
You can start filing in the personal or business information on the first page of the T1 or T2 form boxes, but wait before filling in information for the next pages.

(6)   Complete all the required schedules before filling in the rest of T1 or T2 tax form
Before you start filling in the rest of the pages of your T1 or T2 form particularly related to personal or/and business income, deductions, credits, and taxes payable parts, make sure you have completed all the schedules first required to complete your T1 or T2 form. It’s easier that way.

(7)   Check required items and related information before sending T1 or T2 tax return  to CRA
Before sending your T1 or T2 tax return to CRA, make sure to check all the items that are required to be sent along with your tax return. These items might be required attachments like, receipts, schedules, statements, and payments for the balance owing tax amount and other related items.

       8) Missing information after sending T1 or T2 tax form to CRA
After sending your T1 or T2 tax return, and you suddenly remembered that you missed to include information that should have been included in your recently filed T1 or T2 tax return, don’t worry.

For T1, download a T1-ADJ, T1 Adjustment Request Form from CRA website or request it to be sent by mail, or you can send a signed letter to CRA with details of the taxation year that needs adjustment, with your Social Insurance Number (SIN), address, phone, and details of the changes, and attached required statements or schedules, as supporting documents. You do not have to prepare another T1tax return, just send the Adjustment form, or your signed letter and CRA will adjust it for you accordingly.

For T2, if you are the authorized representative for your corporation, you can access your business account online and make the changes, or you can phone or send a signed letter stating your corporation’s name, taxation year that needs adjustment, with your Business Number, address, phone number, details of the changes, and attached required statements or schedules as supporting documents. No need to send another T2 tax return, just the signed letter with details and send it to the CRA Tax Centre that serves you.
Downtown Vancouver, Business City Centre
Please feel free to leave comments/inquiries or you may contact me at:

Note: The continuation of this topic, “So You Want To Start Your Own Business?” will be continued on next post, “Part 7 of 7: (5) Preparing for the Next Fiscal Period". Until then.

Please feel free to leave comments/inquiries or you may contact me at: 
Earla RiopelBSCom(USA), DipAcc(UBC)

Main Sites: Website ; Twitter ; LinkedIn ; Facebook Blogg 


Year-end Requirements

I hope you have enjoyed reading the last 4 issues of the “7 Basic Things You Need To Know During Start-up Year” as much I enjoyed writing them. Again, here's the complete list:

(1) Types of Business Organizations
(2) Business Product to sell and manufacture and service to perform
(3) How to keep business records
(4) Planning to have employees or sub-contracting
(5) Year-end Requirements
(6) Dealing with the taxman (Canada Revenue Agency)
(7) Preparing for the next fiscal period
Downtown Seattle, WA, USA
This time I will be writing about “Year-end Requirements”. I would say, for some it’s the most exciting part of the business. Why is that? This is when the company finds out if it makes profit (or loss) during the fiscal period reported.

5 Things to Do at Year-end

a) Preparation of Year-end Financial Statements and Closing of Books
b) Management’s Reports
c) Reviewer or Auditor’s Report
d) Preparation of Annual Report
e) Annual General Meeting (AGM)
One of our computer stations:)
Preparation of Year-end Financial Statements and Closing of Books

In Part one (1) I wrote about the 3 types of Business Organizations: (1) Sole Proprietorship, (2) Partnership and (3) Corporation. All 3 are required to keep business records (see Part 3), so at the end of the year the company can have a better picture regarding its business activities throughout the entire year in form of financial statements. These statements are used as tools for decision making, for further improvement, either it’s for expansion or seeking additional investments or financing. Usually financial statements include, Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash Flow or Statement of Changes in Financial Position (if required).

Preparation of year-end financial statements becomes easier if the company has done most of the regular bookkeeping/data entries throughout the fiscal period. So by the end of the year, all it needs is to do a few steps and that includes the preparation of the year-end financial statements. For some who have chosen not to use accounting software, and decided to prepare their financial statements from scratch (manual accounting system), there are a few steps before financial statements are prepared, called the Phases of Accounting Cycle. These phases can be group into two: (1) Prepared throughout the year and (2) Prepared during the end of year.
One of the food stores during an Abbotsford Airshow we attended
Throughout the year includes collection of raw data, and related business information transactions and events happened. This information is analyzed and recorded for journalizing. These journal entries (JE) are then posted to each general ledger (GL) accounts.

At the end of the year, unadjusted trial balance (TB) for each GL account is listed. Then adjusting entries are performed for accurate, unbiased, and reliable presentation of amounts in the financial statements. Adjusting entries are usually performed for few accounts like accrued income and expenses; depreciation of fixed/tangible or intangible assets, bad debts expense, supplies used, and prepaid expenses. For example, accounts which are affected by more than one fiscal period such as: interest expense for long-term liability, rent expense for lease paid for more than a year, tax expense incurred for the current year but not yet paid. Also, insurance expense paid for more than one year, wages accounted and still owing at the end of fiscal period. Lastly, overstatement or/and understatement of amounts are also done during adjusting entries before preparation of year-end financial statements are performed.

Once adjusting entries are recorded on the Journal and posted on the General Ledger, Financial Statements are prepared from the adjusted accounts. After the financial statements have been prepared, then closing entries can be done to close the books.
A snack shop on our way to a sport related event in Kamloops, BC Canada.
Closing of books is performed by transferring the income and expenses balances to Income Summary, which closed to Owner or Partners’ Investment (for sole proprietorship and partnership) or Retained Earnings (for corporation). After posting, only the Balance Sheet accounts will show up. There would be no income and expenses balances from Income Statement that will show. The income and expense accounts will have zero balances, and being ready for the next fiscal period. Only current Balance Sheet accounts will be carried forward for the next fiscal period.

Lastly, Post-Closing Trial Balance is performed. This is to check the debits and credits of the adjusting entries and closing entries, whether they are done properly, and reflected in the Balance Sheet amounts that will be carried forward for next fiscal period.
A flower design shop store, during a sport community event.
Management Report

Though management report is not usually required for a one-person managed company, but it is advisable for a company that has a manager, who is usually responsible for the day-to-day managing of the business operation.  Besides the financial statements presented, it is another useful tool for related parties for their decision-making as to the best interest of the company.

This report is the representation of the manager (s) of the company, usually signed by the highest position related to the management of the business. For bigger companies, management report is usually signed by a Chief Operating Officer, Chairman or President, Chief Operating Officer, Vice President, Chief Financial Officer, or just your only staff, your business manager of your business.

Management Report is usually based from the financial condition of the company.  If they are bigger companies, management staff usually applied the Management Discussion and Analysis (MDA) method. MDA is a more detailed discussion of accounting principles used in the preparation of the Balance Sheet and Income Statement accounts, and if parent company has subsidiaries, these accounting principles are being applied for consolidated financial statements of the subsidiaries as well.

It will likely include the liquidity of its resources, recent accounting standards applied in the preparation of the financial statements. Also, it might include information related to investments and the market risk of exposure involvement associated, and information related to Security Exchange Commission, like SEC new rules.

Basically, management report will include these items on their report:
-          Management taking responsibility of the financial related information presented in the annual report.
-          Management is responsible for the objectivity, reliability, integrity and consistency of information in the financial statements.
-          Management is stating that the financial statement have been prepared in accordance of Generally Accepted Accounting Principles (GAAP) in Canada (or country being reported to, usually the parent company’s business is located).
-          Management has exercised reasonable judgment and best estimate appropriate for the situation have been applied.
-          Management responsibility on reliability of company accounting systems, related internal control to support procedures, and provide reasonable assurance of the financial statements.
-          It will also include how the management safeguard the company assets, and staff accountability to the company as a whole.
-          If applicable, it might include information regarding the role of the Audit Committee of the Board of Directors of the company, their responsibilities in the financial reporting, internal control systems and other related matters with the company’s internal auditor and external auditor.
-          Basically, it is the management statement and representation of the company.
Compilation (Notice to Reader), Review or Auditor’s Report (If required)

Your company might not need a professional accountant to audit, review or compile your financial statements. However, for some companies which are seeking loans and possible investments, most prospective creditors and investors preferred to have an audited, reviewed, or compiled financial statements.

Out of the 3 reports (Compilation or Notice to Reader, Review and Auditor’s report) the auditor’s report has the highest reasonable assurance, then review, and then Notice to Reader. These types of reports, especially auditor’s report, just give extra credibility to the company’s financial statements on top of good accounting systems used in the preparation of these financial statements.

Companies on stock markets are required to have audited financial statements (it can be consolidated with parent’s subsidiaries’ financial statements) by their investors, and governing agencies like the Securities Exchange Commission (SEC).

An auditor can give a company’s financial statements a reasonable assurance that the financial statements being presented are appropriately recorded based on specified criteria and truly reflect the transactions and events happened during the fiscal period.
A fancy place for an AGM? :)
Preparation of Annual Report

The annual report is the most anticipated report by all parties concerned. Why is that? It is the report that contains information (not just the set of financial statements) occurred during the fiscal year. It is sort of a special newsletter by the management to their shareholders or/and other concerned parties (creditors or prospective investors) related to the annual operation activities of the company. Annual report will likely include:
-          Opening letter addressed to Shareholders, or Members, or related parties
-          Highlights of the financial and operating activities during the year.
-          Management Discussion Analysis (MDA) of financial and operating activities of the company
-          Management Report
-          Auditor, Review or Compilation/Notice to Report (if required)
-          List of Financial Statements (Income Statements, Balance Sheet, and Statement of Changes in Financial Position (or Statement of Cash Flows)
-          Notes to Financial Statements will likely include items such as: type and description of the business, reorganization (not applicable on new start-up business), IPO information (if applicable), significant accounting estimates, new acquisitions, receivables and payables important information, financing, net capital requirement, stock options (if any), employees’ benefit plans (if any) , income taxes information, off-Balance Sheet items and credit risk, fair value of investments like financial instruments, and probably will include related party transactions (if any).
-          It will likely include owners/shareholders/investors, board of directors, officers information as well

Please note that above listed items for compiling an Annual Report are not applicable to all companies, especially in a sole proprietorship and partnership types of business organization. Just pick the items that applied to your company accordingly.

Annual General Meeting (AGM)

AGM can have mixed feelings to all parties involved. But whatever result you are expecting, hopefully it is the best for yourself and most all for the entire company. Tension in an AGM is just normal, especially if it involves voting and re-electing of Board of Directors by shareholders, and appointing of officers by the Board of Directors. It’s not all that nerve racking though, since part of the AGM is the presentation of the company’s annual report. As mentioned previously, this report gives all related parties information on how the company’s performed during the fiscal period reported. Also during the AGM, some companies will pick this time of the year to do their giving of awards to those who went beyond their call of duties.

I always think AGM is a good way of starting fresh. People involved have another chance of proving themselves (if they didn’t fully accomplish everything in the last fiscal period). It is another chance to do their best for the company, and working with the best people, who have the same common goal, making healthy profits and at the same time serving the community.
One of New Years closed to Vancouver City Centre.

Note: The continuation of this topic, “So You Want To Start Your Own Business?” will be continued on next post, “Part 6 of 7: (5) Dealing with the Taxman (Canada Revenue Agency (CRA) or other tax governing agencies like the IRS)”. Until then.

Please feel free to leave a comment or you may contact me at:

Earla RiopelBSCom(USA), DipAcc(UBC)
Main Sites  Website Twitter ; LinkedIn ; Facebook ; Blog