Financial management

An accounting period is the span of time a set of financial statements covers, such as a month, quarter or year. Learn how it differs from a tax year or fiscal year-end.

Understand accounts payable, payment schedules and the difference between entering a supplier bill and paying it from your business bank account.

Accounts payable turnover shows how often a business pays its suppliers in a year. See the formula, a worked example and why higher is not always better.

What accounts receivable means, how an aged receivables report helps, and why invoiced revenue can leave a profitable business short of cash.

Accounts receivable turnover shows how many times a year a business collects its customer balances. See the formula, an example and what the result can mean.

Amortization spreads the cost of an intangible asset, or the repayment of a loan, over time. See how it differs from depreciation, with a simple example.

An audit engagement is an independent accountant’s examination of financial statements that ends in an opinion on whether they fairly represent the business.

A business-owner explanation of the balance sheet: assets, liabilities and equity, what the statement reveals, and why it is not a cash forecast.

The break-even point is the sales level where revenue equals total costs. See the formula, a worked example and why cash needs can be higher than the figure.

Budget variance is the gap between what you planned and what actually happened. Learn how to read it, with a simple example and questions for your accountant.

Burn rate is the net amount of cash a business spends each month beyond what it brings in. Learn how to calculate it, with an example and what it means for runway.

Cash basis accounting records income when money is received and expenses when paid. See how it differs from accrual accounting and when Canadian tax rules allow it.

Understand cash flow, why it differs from profit, and how a short cash forecast helps business owners prepare for upcoming payments.

A cash flow forecast estimates when cash will arrive and leave over the coming weeks or months. Learn what goes in it, with a simple four-week example.

A cash flow statement reports the cash that came into and left a business over a period, split into operating, investing and financing activities. See an example.

A compilation engagement is an accountant’s service that assembles financial statements from your records without testing them or giving assurance.

Contribution margin is sales minus variable costs. See how it differs from gross margin, how to calculate it per unit and as a percentage, and what it tells you.

Current liabilities are debts a business must pay within a year or its operating cycle. See common examples, how they affect working capital and what to review.

The current ratio divides current assets by current liabilities to show short-term coverage. Learn the formula, an example and why the result needs context.

The debt-to-equity ratio divides total liabilities by shareholders’ equity to show how a business is financed. See the formula, an example and common pitfalls.

Depreciation spreads the cost of a long-lived asset over the years it is used. Learn how it works, how it differs from CCA, and what to ask your accountant.

EBITDA is earnings before interest, taxes, depreciation and amortization. Learn the formula, a worked example, its limits and why lenders and buyers ask for it.

Financial projections estimate future revenue, expenses and cash. Learn what they include, how they differ from a budget, and what lenders may ask to see.

Understand a corporation's fiscal year-end and why its reporting period, T2 filing date and corporate tax payment deadlines are different dates.

Fixed assets are long-lived items a business uses to earn income, such as equipment and vehicles. Learn how to record them and what separates them from expenses.

Going concern is the assumption that a business will keep operating for the foreseeable future. Learn what it means for financial statements, lenders and warning signs.

Goodwill is the amount paid for a business above the value of its identifiable assets. Learn how it is recorded and how Canadian tax rules treat it.

Gross profit is sales minus the direct cost of what you sold. See how it differs from gross margin and net profit, with a worked example and what to check.

Understand the income statement, period profit and useful comparisons, including why the bottom line is different from cash or taxable income.

Intangible assets have no physical form, such as patents, trademarks, software and goodwill. See what reaches the balance sheet and how tax treats them.

Inventory turnover shows how many times a business sells and replaces its stock in a year. See the formula, a worked example and how to read the result.

Liquidity is how quickly a business can turn assets into cash to meet short-term bills. Learn how it is measured, with an example and what to ask.

What a marginal tax rate is, how to find yours from federal and Ontario brackets, and why it matters for deductions and extra income. Includes a worked example.

The matching principle records expenses in the same period as the revenue they helped earn. See how it works, with an example, and how it relates to tax rules.

Net income is the bottom line of the income statement. Learn why it differs from the cash in your bank and from taxable income, with a simple example.

Net profit margin is net income divided by revenue, shown as a percentage. See how to calculate it, a worked example and why comparing it needs care.

Operating expenses are the everyday costs of running a business beyond direct costs of sales. See examples, how they differ from COGS and capital costs, and what to check.

Operating income is gross profit minus operating expenses. See the formula, a worked example, how it differs from net income and EBITDA, and what to ask your accountant.

Owner’s equity is what is left of a business’s assets after liabilities. See how it differs for a sole proprietor and for a corporation.

Petty cash is a small amount of cash kept for minor business costs. Learn how to track it, what receipts to keep, and how it fits into Canadian records.

Learn what the GST/HST public service bodies’ rebate is, which charities and non-profits can claim it, how Ontario rates work, and the filing deadline.

The quick ratio compares cash and receivables with current liabilities, leaving out inventory. See the formula, an example and where definitions differ.

Learn why retained earnings are part of equity rather than a separate cash reserve, and how profits, losses and distributions affect the balance.

A review engagement is an accountant’s service that gives limited assurance on financial statements through enquiries and analysis, short of a full audit.

Learn how working capital differs from cash and the current ratio, with an example showing why the timing of receivables and liabilities matters.

What year-end cut-off means, how it decides which period a sale or expense belongs to, and the checks to run around your fiscal year-end.