Encyclopedia · For Ontario business owners
Accounting, explained.
Understand the language behind your accounts. Definitions, practical examples and the questions worth asking next.
Connect unfamiliar accounting language to the records and decisions behind it.
Visual labels: Plain terms; Practical context; Related concepts.20 terms to explore
- Financial statements
Accounts payable
Accounts payable is money a business owes suppliers for goods or services already received on credit. It is generally a current liability. A payables report helps identify the bills, their due dates and any disputes or credits, so that a bank balance is not mistaken for cash free of commitments.
Read the definition - Financial statements
Accounts receivable
Accounts receivable is money customers owe a business for sales made on credit. It is generally recorded as an asset, while an aged receivables report groups unpaid amounts by how long they have been outstanding. A receivable is a claim to payment, rather than cash already available to spend.
Read the definition - Bookkeeping
Accrual accounting
Accrual accounting records income when it is earned and expenses when they are incurred, rather than only when cash changes hands. Receivables and payables help connect those events to later payments. Canadian tax reporting generally uses the accrual method for business income, with specific exceptions requiring separate consideration.
Read the definition - Financial statements
Balance sheet
A balance sheet reports a business's assets, liabilities and equity at a specific date. The basic relationship is assets equal liabilities plus equity. It describes a financial position, whereas an income statement covers performance over a period. A balanced statement can still contain errors that require investigation.
Read the definition - Bookkeeping
Bank reconciliation
A bank reconciliation compares the cash account in your bookkeeping with the corresponding bank statement at a particular date. It explains timing differences and identifies missing, duplicated or incorrect entries. The goal is an explained balance, supported by records, rather than simply forcing two totals to match.
Read the definition - Bookkeeping
Bookkeeping
Bookkeeping is the ongoing recording, classification and checking of a business's financial transactions. It turns invoices, receipts, payments and other records into accounts that support reporting and tax work. A connected bank feed is an input to bookkeeping; it does not explain every transaction or complete the work by itself.
Read the definition - Corporate tax
Capital cost allowance
Capital cost allowance, or CCA, is the tax deduction framework for eligible depreciable property used to earn income. The applicable class, rules and circumstances determine the available deduction. It is distinct from depreciation recorded in financial accounts, and buying equipment does not automatically establish an immediate deduction for its full price.
Read the definition - Financial statements
Cash flow
Cash flow describes money moving into and out of a business over a period. A cash-flow forecast estimates the timing of future receipts and payments. Profit measures a different aspect of performance, so a profitable business can still have a cash shortage when collections and commitments fall at different times.
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Chart of accounts
A chart of accounts is the organized list of accounts used to classify a business's transactions. It separates assets, liabilities, equity, income and expenses, with enough detail to support useful reports. It is the structure behind your accounts, rather than a list of bank accounts or a tax return.
Read the definition - Corporate tax
Fiscal year-end
A fiscal year-end is the closing date of a business's financial reporting period. For a corporation, the tax year is generally its fiscal period. The year-end date helps determine reporting and tax deadlines, but it is not itself the deadline for every return or payment the business makes.
Read the definition - GST/HST
GST/HST
GST/HST is a consumption tax administered under Canada's federal sales-tax system. A registered business may need to charge tax on taxable supplies, report tax collected or collectible, and account for eligible input tax credits. Registration, the treatment of a supply and the tax rate require their own checks.
Read the definition - Financial statements
Income statement
An income statement summarizes income, expenses and resulting profit or loss for a defined period. It is often called a profit and loss statement. Its usefulness depends on consistent classification and appropriate recognition of transactions. Accounting profit is not automatically the same as cash generated or taxable income.
Read the definition - GST/HST
Input tax credit
An input tax credit, or ITC, is a way an eligible GST/HST registrant recovers GST/HST paid or payable on purchases used in commercial activities. Eligibility, supporting documentation, use of the purchase, timing and special rules matter. An income-tax expense deduction and an ITC are separate calculations.
Read the definition - Personal tax
Notice of assessment
A notice of assessment is the CRA's summary after it processes and assesses a tax return. It can show the assessed result, account information and explanations of changes. It is different from the return you submitted and does not mean supporting records can be discarded or that later review is impossible.
Read the definition - Payroll
Payroll remittance
A payroll remittance is a payment to the CRA for amounts withheld from employees and applicable employer contributions. It is separate from the net pay employees receive. Remittance timing depends on the employer's assigned remitter type and other relevant circumstances, rather than one deadline that fits every business.
Read the definition - Financial statements
Retained earnings
Retained earnings represents accumulated earnings kept in a corporation after distributions and relevant adjustments. It is part of equity, not a separate bank account. The amount does not establish how much cash is available, whether a dividend should be declared or whether the corporation has met its tax obligations.
Read the definition - Corporate tax
Shareholder loan account
A shareholder loan account tracks amounts between a corporation and a shareholder that are recorded as loans or amounts owing. The direction matters: the corporation may owe the shareholder, or the shareholder may owe the corporation. The account label does not determine the tax treatment, and loans from a corporation can have significant tax consequences.
Read the definition - GST/HST
Small supplier
Small supplier is a GST/HST status determined under specific revenue and timing rules. For many businesses, the relevant threshold is $30,000 of worldwide taxable supplies, including those of associates, tested over a single calendar quarter and four consecutive calendar quarters. Exceptions and special cases mean the number is not a universal registration rule.
Read the definition - Corporate tax
T2 corporation income tax return
The T2 is Canada's corporation income tax return. It reports information used to determine a corporation's income tax for a tax year, with supporting schedules as required. It is separate from the owner's personal return, and submitting it is a different obligation from paying corporate tax balances or instalments.
Read the definition - Financial statements
Working capital
Working capital is current assets minus current liabilities. It gives a view of the resources supporting near-term operations after near-term obligations are considered. It is an amount, while the current ratio divides current assets by current liabilities. Neither measure tells you exactly when money will reach or leave the bank.
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