Financial accounting refers to a specialized branch of accounting and is an essential process for businesses and corporations in Canada.
The purpose of these statements is not to report the company's value. Instead, they must provide enough information for others to independently assess the company's value. These financial statements are issued regulary to relevant parties, including shareholders, the public, investors, lenders, customers, and more. Some are requirements for registered corporations in Canada on an annual basis.
Compiling and producing accurate and thorough financial statements through financial accounting is essential for business growth and wealth management. Working with an experienced advanced financial accountant can help your business achieve new heights.
How can professional financial accounting services take your business to the next level?
Introduction to Financial Accounting - What is Financial Accounting?
Financial accounting is a specific subsection of general accounting important for small businesses and corporations to build wealth. Generally, it is the process of recording, summarizing, and reporting a company’s business transactions through specific financial statements.
Financial statements are circulated externally, meaning they are made available to:
- Shareholders
- Management
- Auditors
- Lawyers
- Investors
- Banks
- Lenders
- Creditors
- Suppliers
Additionally, where the company is public, it can even be circulated online to competitors and investment analysts. Finally, in some situations, they are required by law. For example, registered companies in Canada must disclose specific financial statements when they file their corporate taxes (T2).
Because financial accounting focuses on creating financial statements for corporations, a corporation must work with an accountant specializing in completing these statements. Even corporations with an in-house accounting team may be missing a key member with the experience to create these statements.
This is where outsourced financial accounting help comes in. Whether as an extension to your internal existing accounting department or to act as your general accountant as well, an oursourced financial accounting consultant can create your corporation’s financial statement at required intervals and ensure full accuracy, confidentiality, and professionalism at all times.
What’s the Difference Between Accounting and Financial Accounting?
Accounting encompasses all of a company’s financial transactions regularly. It includes a set of procedures for invoicing, managing expenses, payroll, taxation, data management, and more.
Financial accounting is a specific branch of this, concerned with generating these financial reports. It relies on standards set by the Generally Accepted Accounting Principles (GAAP) to create the documents accurately.
Many Canadian corporations choose to work with an outsourced accountant to minimize their overhead costs and maximize their flexibility. But, it is essential that when selecting an accounting firm, you work with one with financial accounting experience as well.
Financial Accounting and Managerial Accounting - Are They The Same?
Financial and managerial accounting are closely related, but not identical. Managerial accounting is generally internal and provides financial information to a company's management team. It is used primarily by management to make timely and sound business decisions for the company. On the other hand, financial accounting is concerned with creating external reports for shareholders, investors, and other relevant parties concerned with the company’s value.
How Can Corporate Financial Accounting Help Your Business?
Financial accounting for corporations is important for several reasons and comes with multiple benefits for your corporation or organization. A business stands to make great gains when it works with a reputable financial accounting firm to produce financial statements.
How can your company benefit from financial accounting services?
Meet compliance standards
Financial accounting is required by law for corporations in Canada. Canadian corporations must file a balance sheet and income statement each year when they file corporate taxes (T2) and may need more depending on the corporation’s circumstances. Meet these tax obligations when you work with a financial accounting consultant.
Build corporate reputation
Financial statements are referenced by individuals and organizations within and outside a company. So, build your company’s reputation with these external individuals when you create professional and accurate financial statements.
Find areas for financial improvement
Financial statements give you a clear picture of where you spend and make the most money. Easily distinguish what costs are unnecessary and minimize expenses to maximize your profits.
Attract new investors and capital
Before a potential investor commits to investing in your company, or a bank or lender will provide you with a loan, they will ask to see your financial statements to evaluate your company’s value and risk. Financial statements allow you to attract these capital sources to expand your business and assets.
Grow your business
Financial accounting gives you a window into your company's financial well-being and finds growth opportunities. Cut unnecessary costs and grow your profits and investments when you have sound financial statements.
Get comprehensive advice and consulting
A financial accountant does more than just compile documents and type reports. They provide invaluable advice about financial organization, bookkeeping, opportunities, and areas for expansion or shrinkage.
Financial Accounting Outsourcing Services from Accountor CPA
At Accountor CPA, we understand the importance of transparent, accurate, and compliant financial statements for your company. Our scalable and customizable financial accounting services are fully available virtually to give you flexibility in building a relationship with us.
The financial accounting outsourcing services we offer include:
- General ledger preparation
- Financial Statement preparation
- Financial report analysis
- Audits, Review Engagements, and Compilation preparation
- Corporate tax and business advice
- Comprehensive financial planning
- Corporate tax filing (T2)
- Tax planning and preparation
- Tax compliance
- Liaising with the Canada Revenue Agency as required
- Assistance with auditing as necessary
- Payroll services
- Bookkeeping
- General accounting activities
Our team of experienced and qualified CPAs is passionate about providing scalable financial accounting services that suit your business. So whether you are a large corporation looking for an external accounting firm to create objective financial statements, or a small business or start-up needing more accounting services, we can help.
Bookkeeping and Financial Accounting Packages
Maintaining organized finances and bookkeeping processes can take a lot of work as a company grows. Chaotic books can lead to financial statements taking much longer to prepare than necessary increasing the risk of inconsistency, error, or missing deadlines.
Accountor CPA offers robust and personalized bookkeeping and financial accounting services remotely to ensure your finances stay organized and accurate year-round. That way, when preparing financial statements, you can be confident that nothing is overlooked and fully meet all your obligations.
Contact us today to learn more about our bookkeeping and financial accounting services that can simplify your business operations year-round and improve your company's compliance.
Understanding Financial Accounting Statements
Five types of financial accounting is primarily concerned with issuing external financial statements.
There are five types of financial statements that are compiled and created:
- Income Statement
- Balance Sheet
- Cash Flow Statement
- Statement of Retained Earnings
- Statement of Comprehensive Income
A professional financial accountant will be experienced in creating all of these financial statements and providing objective and accurate data. The Chartered Professional Accountants (CPAs) at Accountor CPA specialize in financial accounting and can ensure your corporation has all the necessary financial documents to achieve its goals.
Working with a financial accounting consultant ensures you receive the financial statements your company needs (as not all may be mandatory) and complete accuracy.
The Income Statement
Income statements, also known as profit and loss statements, show the change in equity due to specific expenses and revenues over a particular period. It is used to assess profitability. When the net income is positive, it is called a profit. When it is negative, it is a loss.
The income statement format includes:
- Expenses
- Operating expenses, rent or mortgage payments, payroll, supplies, bills, and other charges
- Revenue
- Pay provided by customers
- In the case of a corporation, it also includes the results of issuing shares, repurchasing shares, and paying dividends
The balance sheet is a snapshot of a business’ financial position at a specific time. It is the document most often used by investors, bankers, and suppliers for understanding your business's finances.
The balance sheet typically includes:
- The assets (resources of a company) on the left side, known as the debit side
- The liabilities and equity on the right side, known as the credit side, show how the resources are funded
- Stockholders’ equity at a specific date
The Cash Flow Statement
Cash flow statements tell you how much cash entered and left your business over a particular period, whether monthly, quarterly or annually. This type of financial statement is likely unnecessary if you are a small business and no outside organizations are requesting it.
The cash flow statement structure has three parts:
- Cash Flows from Operations
This is what you make and spend in the regular course of doing business. - Cash Flow from Investing
This is money you invest in things like the purchase of equipment. - Cash Flow from Financing
This includes money the owner invested in the business, as well as taking out and repaying loans.
The Statement of Retained Earnings
Also known as the Statement of Stockholders’ Equity, this statement details the amount of income a company has left over after dividends are paid to stockholders.
Statement of Comprehensive Income
The Statement of Comprehensive Income covers two sections:
- Net income (from the income statement)
- Other comprehensive income (adjustments from foreign currency translation, hedging, and other benefits)
The sum of these amounts is known as the comprehensive income.
What is the Cost of Financial Accounting and Advisory Services?
The fees for financial accounting depend on the size of your corporation and which financial statements are required. For example, a small business that must file the basic mandatory financial statements with the CRA will have lower rates than a national corporation that requires all financial statements for its shareholders.
When choosing a financial accounting firm, ensure you work with a team that has a wide breadth of experience across industries so you know you are getting the best services. Finding a flexible firm that can offer you the services you need without charging you for unnecessary ones is also recommended. This can help keep your costs down and save you time.
Get Financial Accounting Help from the Professionals
Are you looking to gain more investors or shareholders? Are you thinking of making your company public? Or do you simply need to fulfil your corporate tax obligations to the CRA?
The qualified team at Accountor CPA offers personalized outsourced financial accounting services to corporations, SMEs, small businesses, and start-ups across Canada. We use our years of experience to compile and create accurate financial statements that follow Generally Accepted Accounting Principles (GAAP) and present all relevant and required financial data to readers.
We can help you grow your business and achieve your financial goals like never before. So let’s get started with a free consultation and learn what Accountor CPA’s financial accounting services can do.
